Retirement is one financial goal that cannot be met through loans. It is important to begin early and develop an investment strategy for the longer duration. Revising the strategy as per different aspects during your lifetime is equally important.

With the increase in life expectancy, earlier retirement, and inflation, retirement planning has become more important that before. Joint family system is no longer prevalent in the country, which further makes planning for your senior years crucial.

A few common questions that come to mind while discussing retirement planning include:

• How much should I save?
• Where the money should be invested?
• When to start retirement planning?

The corpus needed for retirement is not same for every person and primarily depends on the personal situation. Starting your retirement planning immediately when you begin your working life is recommended.

Where to invest your money is discussed in detail in the following paragraphs. There are several options that could be used for creating your retirement corpus.

• Insurance companies’ retirement plans

Companies that offer life insurance offer bundled products, which include the advantages of investment and insurance coverage. During the accumulation phase, individuals pay the premiums and accumulate money during the policy duration. This amount is invested in different Insurance and Regulatory Development Authority (IRDA) securities.

During the vesting stage, the investors enjoy payouts from their accumulated corpus. The policyholder can choose this age, which generally varies between 40 and 70 years. Individuals can withdraw up to 33% of the corpus and avail the balance as a pension.

• Unit-linked investment plans (ULIP)

This is a long-term investment plan and is also one of the several tax saving schemes. With ULIPs, investors can enjoy building higher corpus. However, because the returns are market-linked there is a risk of losing all the investment capital. Some Net Asset Value (NAV)-based plans offering guaranteed returns are available; however, the charges are significantly steep.

• Pension schemes in India

There are several pension schemes in India, such as Public Provident Fund (PPF), Employee Provident Fund (EPF), and National pension system (NPS). These schemes are commonly used for building retirement corpus by a majority of the Indian population. In addition to offering capital protection, these schemes are also tax saving schemes, which further increase their popularity.

PPF accounts can be opened in post offices, public banks, and a few private sector banks. The investors must contribute for 15 years before being able to withdraw the accumulated corpus. Loans and pre-mature withdrawals are allowed based on certain terms and conditions. The current rate of interest on PPF accounts in 8.1% per annum.

EPF is available for employees earning up to INR 15,000 per month. Employers contribute some portion of the employees’ basic plus dearness allowance to help accumulate higher corpus.

The newest scheme, NPS is a defined contribution plan where investors can invest a minimum of INR 6,000 per year. The money is invested in different assets, such as government securities, stocks, and corporate bonds. You can easily find information on how to apply for NPS on the internet.

The NPS account matures when the subscribers reach 60 years. At this time, s/he can withdraw up to 60% of the accumulated corpus and convert the balance to an annuity scheme. Further, the contributions made to this scheme enjoy the NPS tax benefits under section 80C of the Income Tax Act.