A self-sufficient retired life is everyone’s dream. This distant dream can be turned into a reality only when due prominence is given to planning and saving. But in reality, most of us undermine the post-retirement needs. And soon when the retirement is around the corner, we realize how tough it is to continue the same lifestyle afterward.
A thorough retirement planning is the only solution to lead a dignified retired life along with your spouse. Take into account your life expectancy and number of years left to retire and calculate the corpus needed to live all your life.
If you have planned for post-retirement income through instruments like Employee’s Provident Fund (EPF), Public Provident Fund (PPF), and National Pension System (NPS), analyze if the total yield is inflation-adjusted and is sufficient to meet the need. If it is not sufficient, substantiate with other investments that yield inflation-adjusted returns to create wealth for retirement.
The equity diversified mutual fund i.e. Equity Linked Savings Scheme (ELSS) is one such instrument that fulfills the objective.
Benefits of this equity diversified mutual fund include:
- Capital appreciation
- Higher returns
- Tax-free dividend
- Three-year lock in period
- Option to hold investments until retirement
As the long-term capital gains on equity are tax-free after a year, the income from ELSS is tax-free. It comes with a lock in period of 3 years, but you need not redeem the amount after this period. You may opt to continue and hold the investments until retirement.
The potential of returns is higher with ELSS as the major allocation is in Equity asset class, unlike NPS that comes with a cap of 50% allocation in equity instruments. Moreover, investments through Systematic Investment Planning (SIP) for long-term would benefit from the volatility of markets.
In conclusion, ELSS would be the best tax saving yet wealth building instrument for young investors. Plan your goals and start saving now, without waiting for the end of the financial year to start investments. Remember that investing for tax-savings should not be the motto. Rather, right investments could help you reach your goal while saving tax. Take financial advice from experts before investing.
Move ahead with a vision and plan your retirement along with other financial goals of life. Fulfill all your post-retirement to do bucket list with confidence