How to invest in mutual fund retirement plans

Retirement is one of the most important financial goals in the life of an individual. Thus, due care needs to be taken in selecting an appropriate retirement plan. The plan should not only preserve capital but also provide inflation indexed returns during retirement years. Mutual fund retirement plans are structured to provide lump sum or annuity payouts and provide a wide range of products for retirement savings.

Who can invest?
Any individual less than 60 years of age can invest in a retirement planning scheme of a mutual fund. There is a mandatory lock-in period of five years or till retirement age (whichever is earlier), for investments made in these funds.

How to invest
To invest in a mutual fund, KYC compliance is mandatory. KYC can be done beforehand or form and supporting documents can be submitted at the time of investing. If the investor already has a folio with the fund house, the same can be used for new investment too. Investment can be made online as well as offline.

Choice of frequency
One can make an Investment in such funds as a lump sum at one go or through SIPs. In SIPs, the investor can create a debit instruction in his/her account so that every month a specified amount gets invested towards retirement.

Choice of asset allocation
One can choose an asset allocation plan that best suits his risk and return profile. The retirement fund provides a choice of different asset allocation from investing in equity to only fixed income instruments.

Taxation
Investments made in notified retirement funds of mutual funds qualify for a deduction under Section 80C.

Point to note

• It is best to take the advice of a retirement adviser while choosing a retirement product.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)