Investor's Psychology

Best Retirement Investment Plans in India

Created on 24 Jan 2022

Wraps up in 7 Min

Read by 4.8k people

Updated on 23 Sep 2022

There goes a very famous saying that ‘it is not about how much you make, but how much you keep of it and how much of it works for you.’ Today, we will discuss the second and third parts of this saying. 

Indians live for the weekends. They exhaust themselves the entire week just so they can go wild on Saturdays and sleep through Sundays. If we zoom out, the ‘week’ is a person’s working-(shelf)-life, and the weekend is the retirement with no following weekdays in the queue to work for. 

You are continuously working hard and fulfilling all your responsibilities and obligations. It is not only your right but also a necessity to take early retirement or plan for a luxurious life after retirement.

Keeping up with your current lifestyle even after retirement is what retirement planning is all about. We will provide you with the best retirement investment plan in India so that you can be your own budhape ka sahara. Keep reading to find out what’s best for you. 

What is Retirement Planning?

Everyone needs to prepare for their future, and they need to start today. Retirement planning is accumulating the amount of money you and your spouse would require to live your life after retirement without depending on anyone else. 

Rather than accumulating in cash, one must invest to take advantage of compounding as well. And as each person’s goals are different, their retirement planning will also be different. It will depend upon some factors such as: At what age are they planning to retire? Their current living expenses? Is their spouse earning or dependent on them? And how much is available in employer provident funds? 

Why plan for your retirement?

This is one of the most important questions one should ask themself before planning for retirement. 

In this fast-paced life, you sometimes miss spending time with your spouse or family, and after retirement, you want to pursue your dreams that your hectic job did not permit you to, or you might want to go on a solo trip or a vacation with your spouse.

You are retiring from work and not from life, which is exactly why you should plan for retirement. If you start to plan and invest early for your retirement, you can thoroughly enjoy your post-retirement life. 

Apart from that, this will provide you and your partner with financial stability and independence. People need to understand the fact that their retirement is their responsibility and not their children’s. This will help you to maintain the same day-to-day lifestyle without worrying about monthly expenses. 

Planning for retirement will prepare you for any emergency circumstances you may face post-retirement. You would not have to rely on others for any kind of emergency need or unexpected medical expenses. 

Importance of retirement investment plans

Accumulating funds for retirement is not a good idea. Sure, you will save money for a period of your life without little to no income, but the money will have lost its value due to inflation. As time passes, inflation makes it so that the production of new currency makes it lose its value over time, making life more expensive.

The only way to counter this is to invest the accumulated funds. The returns on investment help combat the inflationary pressure on one's funds. We've even got a secret tool that can calculate the amount you would need for retirement, down to the last rupee!

Par ruko zara, sabar karo!

Benefits of retirement plans

Besides planning and growing money for retirement, there are other benefits of investing in retirement plans as well. There are investment options that help save tax, like the National Pension Scheme

Nowadays, multiple products are available in the market which you can customize as per your needs and requirements. As the retirement planning is for a longer duration, it is not much impacted by the market volatility, and side by side provides better returns as well. 

These plans assure you to provide regular income after retirement to fulfil your financial needs. Your money will work for you so that you can live a stress-free life. So, what are you waiting for? Choose the plan which suits you and start investing TODAY!!

Types of retirement plans

Broadly speaking, there are two types of retirement plans. One is the savings plan, while the other is an annuity plan.

Under the savings plan, you need to invest funds regularly until your retirement age. And you will start getting returns post-retirement. These funds help you grow your funds for the retirement period. 

While in the annuity plan, one can start investing and can get a regular amount of money till retirement. This is in the hands of the investor to decide when he wants to start getting this regular income. The investor also has an option to decide whether he wants to receive payment on a monthly, quarterly, semi-annually, or annual basis. 

While selecting the best retirement option for themselves, investors need to find out their risk appetite. To earn higher returns, one needs to take higher risks; would you be willing to bear that? Answer this question and then decide which plans to invest in. To decide the best plan, one needs to align the risk-bearing capacity of an individual with the associated risk of the investment products. 

Best retirement investment plans in India

  1. National Pension Scheme
    This is the best retirement planning investment scheme as this will also provide exemption in taxation. This comes under the jurisdiction of the finance ministry of the government of India. On the retirement date, the beneficiary can withdraw the amount in a lump sum or sign up for the annuity payments to be used as regular income during the retirement period.

    It is the world’s lowest-cost retirement plan. This scheme is open to all the citizens of the country, be it residents or non-residents, but they should be between the age of 18-65 years.

    Your sabar has come to fruition Recipe is a tool launched by Finology to help you plan for any kind of financial goal you have. Similarly, you can use this for planning for your retirement. Try out the recipe’s NPS retirement section to invest in your retirement. It has provided a return of around 12.8% in the past. And even the risk is medium. So people with medium-risk appetites can start investing here. This scheme also provides you with a tax benefit.

    You could definitely crunch in numbers to check where you are at and how much you'll have to save for a luxurious retired life.

  2. Public Provident Fund 
    This is also a tax-saving instrument. It's also known as a savings-cumulative-tax savings investment vehicle since it allows you to create a retirement fund while lowering your annual taxes. The interest earned and the returns in this fund are not subject to tax.

    One can start this scheme even with a minimal amount of 500 INR. Any Indian citizen is allowed to have PPF but one citizen can only have one PPF account except the second account is a minor's. Another point to be noted is that the tax exemption will be given till the amount of 1.5 Lakhs is deposited in PPF. 

  3. Mutual funds 
    Mutual funds systematic investment plans (SIP) can also be used for retirement planning. Mutual funds can help you earn higher returns than PPF or NPS. But mutual funds investments are subject to market risk. With the help of mutual funds, individuals can have exposure to different asset classes which helps them in diversification and provide them with an option to invest in multiple asset classes as per their risk profile. 

    Mutual funds provide a diverse array of investment options to suit a variety of investment goals and risk appetites. If you start saving for retirement when you're young, you'll have the most exposure to equities, particularly riskier equity sub-categories like midcap and small-cap funds, which have the potential to create big returns over time. 

  4. Direct Equity 
    If you are well versed in the financial markets, and already invest in the market, you can try out direct equity investment to accumulate a corpus for retirement. However, the risk under this method is quite high. It is advisable for only those individuals who already have exposure to financial markets and whose risk appetite is also very high.

    One needs to consider that this is the most volatile market with no guarantee of return, though the high risk may lead to high returns creating a good amount of wealth for you. The sole silver lining is that, over extended periods, equity has outperformed all other asset classes in terms of inflation-adjusted returns. To reduce their risk to some extent, investors can diversify by investing in multi stocks in different sectors or according to market capitalization

The Bottom Line

We hope you get an idea regarding how to start planning for your retirement. Worry not, it's never too late to start. So check out Recipe by Finology to choose the best plan for your retirement. Could you think of any other investment tools where one can invest for retirement planning? Let us know in the comment section below. 

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Kanishka Tayal

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Kanishka is a finance enthusiast, currently pursuing her master's in Banking and financial services domain. She loves to doodle in her spare time. She is a keen learner and is willing to pursue her career as a financial analyst.

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