We plan and save all our professional lives to prepare for our golden years—retirement. For financial independence, to tackle inflation, and to avoid reliance on social programs, we must choose a retirement investment plan wisely, as it determines our quality of life later.
One of the popular retirement investment options is the Employees' Provident Fund Scheme (EPF), a benefit scheme run by the Government of India's Ministry of Labour and Employment.
What is EPF?
In this scheme, the employer and you contribute a certain sum every month until you work for the employer. EPF is also a tax-saving instrument offering relatively higher interest rates than other saving schemes.
Other retirement investment options
While EPF is an attractive option, you can also consider the following alternatives:
- Public Provident Fund (PPF): A long-term savings instrument backed by the Government, PPF contributions are made solely by you, unlike in EPF. As the withdrawal of funds is restricted, this scheme can yield good returns thanks to compounding the interest.
- National Pension System (NPS): NPS is a market-linked, voluntary retirement savings scheme open to all citizens. Withdrawals are also restricted here, so long-term build-up of funds is an advantage.
- Insurance-linked Annuities: Various Insurance products provide regular payments after retirement. These products also come with a life cover.
- Mutual Funds and Stocks: Mutual Funds and stocks are a good way to increase wealth over the long term. Depending on one's risk appetite, one can invest in the market for retirement planning.
- Real Estate: Property is an appreciating asset and rental income can serve as a source of finance during retirement.
- Fixed Deposits: Traditional fixed deposits in banks provide secure but generally lower returns. Also, the principal invested amount has no growth, and the income generated is taxable.
Each option has its pros and cons. It's important to carefully evaluate all available options and decide depending on your life goals, responsibilities and ability to tolerate losses. Most people opt for a mixed bouquet of retirement options depending on their aims. Consulting a financial advisor is recommended before making any decisions.
