The need for a proper financial plan to build a retirement corpus for an individual has only gained in importance in recent times.
Is your retirement plan on track?
- Apr 7, 2016,
- Updated Apr 12, 2016 5:51 PM IST
According to the United Nations World Population Prospects, India's 60-plus population is expected to reach 323 million by 2050 - a number greater than the US population of 2012. And given the changing social landscape, moving away from joint family set-ups to nuclear families, making arrangements to support one's sunset years is becoming increasingly important. However, building a nest egg has always taken a back seat for the Indian middle class, although most of them plan to catch up with the niceties of life post retirement. Says Sudipto Roy, Managing Director, Principal Retirement Advisors: "Pension policies are still a push product in India due to lack of awareness and expectations of individuals that their children will take care of them after retirement. This keeps them away from planning early.
Given the increasing life expectancy, one cannot completely leave out equities. In such a scenario, monthly income plans are an attractive bet. Simply put, these are debt-oriented hybrid funds that provide regular income along with capital appreciation. Typically, fund houses invest 20-30 per cent of their portfolio in equities to bring in growth, while the remaining 70-80 per cent is invested in fixed-income securities. This ensures growth as well as returns. Also, liquidity is quite high. The dividend generated is paid to investors on a monthly, quarterly or half-yearly basis.
MIPs are, however, by far the most liquid. In case of emergencies one can exit before the completion of one year by paying an exit load of around 1 per cent. From a tax perspective, they are treated as a debt fund and, therefore, they are taxed at 20 per cent with indexation. On a one-year return basis, the top performing hybrid fund has given returns of 9 per cent.
Now that you know the products and how they work, get to work rightaway to start building your nest egg and secure your sunset years. After all, it's never too early.
According to the United Nations World Population Prospects, India's 60-plus population is expected to reach 323 million by 2050 - a number greater than the US population of 2012. And given the changing social landscape, moving away from joint family set-ups to nuclear families, making arrangements to support one's sunset years is becoming increasingly important. However, building a nest egg has always taken a back seat for the Indian middle class, although most of them plan to catch up with the niceties of life post retirement. Says Sudipto Roy, Managing Director, Principal Retirement Advisors: "Pension policies are still a push product in India due to lack of awareness and expectations of individuals that their children will take care of them after retirement. This keeps them away from planning early.
Given the increasing life expectancy, one cannot completely leave out equities. In such a scenario, monthly income plans are an attractive bet. Simply put, these are debt-oriented hybrid funds that provide regular income along with capital appreciation. Typically, fund houses invest 20-30 per cent of their portfolio in equities to bring in growth, while the remaining 70-80 per cent is invested in fixed-income securities. This ensures growth as well as returns. Also, liquidity is quite high. The dividend generated is paid to investors on a monthly, quarterly or half-yearly basis.
MIPs are, however, by far the most liquid. In case of emergencies one can exit before the completion of one year by paying an exit load of around 1 per cent. From a tax perspective, they are treated as a debt fund and, therefore, they are taxed at 20 per cent with indexation. On a one-year return basis, the top performing hybrid fund has given returns of 9 per cent.
Now that you know the products and how they work, get to work rightaway to start building your nest egg and secure your sunset years. After all, it's never too early.