Financial planning is about achieving your life goals and accumulating enough wealth for an exciting retirement. As we all know, retirement is a period in which your standard monthly wage ends, and you depend on your savings to pay your bills. Keeping the concerns of the working class in mind, retirement mutual funds are an excellent investment option. Using a retirement calculator in India, you can compute the expected corpus at the end of the mature period.

Whether you want to tour the world or purchase a new house, retirement plans empower you to live your dreams while remaining financially independent. Please continue reading to learn more about retirement mutual funds and their benefits.

What is a Retirement Mutual Fund?

A retirement fund is a retirement solution-oriented scheme that assists you in saving for retirement. These funds diversify their investments by including government securities, which are low-risk and generate consistent returns and debt and equity assets. Once you know what is NAV of a particular plan, you can invest via SIP. Retirement mutual funds are open-ended and typically have a 5-year lock-in period or until retirement, whichever comes first.

The fund's main objective is to create a sizable corpus and ensure steady income after retirement. Investors can invest in these funds either in lumpsum or take the SIP route. Similarly, you can withdraw the money either in lumpsum or through a systematic withdrawal plan. These funds typically have two stages, these are:

• Accumulation stage
• Vesting stage

What Are the Benefits of a Retirement Fund?

The following are some of the advantages of investing in retirement mutual funds.

• Guaranteed Vesting Benefit

The retirement plans ensure that you will get a guaranteed income to let you live a stress-free life post-retirement. Moreover, you also get the option where your wife gets the pension in case of your untimely death.

• Long-Term Saving

These funds are long-term savings plans in which the power of compounding assists in creating a significant corpus. The goal is to provide income stability for the policyholder after retirement.

• Flexible

Another advantage of a retirement mutual fund is choosing how you want to be paid once you retire. Depending on your needs, you can choose between a lump sum withdrawal or a monthly annuity.

• Tax Benefit

According to Section 80C of the Income Tax Act, retirement plans are eligible for tax deductions of up to Rs. 1.5 lakh each year. Payments made to purchase a new policy or renew an existing coverage are tax-deductible. However, the sum paid at maturity is tax-free. Still, the remainder of the amount utilised for annuity comes under taxable income and is taxed according to the new IT slabs.

• Offers Insurance Cover

The retirement plans also provide the policyholder with insurance coverage. It financially protects the policyholder's dependent family members in the event of his untimely death. Furthermore, some policies allow for a lump sum payout in the event of a medical emergency; nonetheless, it is advisable to check the policy before applying.

• Low Risk

Because of their exceptionally low-risk exposures, retirement plans are among the secure financial solutions.

Investing in mutual funds in India is a simple and easy way to create wealth over time. However, it is best to begin investing in retirement mutual funds early in your career to ensure that you receive adequate returns to live a comfortable post-retirement life.