Mutual Fund Investment Can Act As Your Retirement Income

We learn to live a decent lifestyle through education and by looking at people around us. However, we earn to pay for all that. Thus, there will be needs even when one day the age for earning a livelihood will have passed us by. Hence, from the outset one should plan to hold their head high by planning for lifestyle sustenance post retirement.

Some experts say that one should start out with the 4% rule whereby the envisaged requirement should be taken as 4% and thereby the sum for the investment is worked out. Mutual Funds might sound risky simply by name but offer great options for maintaining the needed flow of money after retiring. Tailor made funds for retirement are being made available with names such as income replacement or retirement income funds.

The Indian mutual fund industry is valued at around 12 trillion rupees. The Reliance group company was recently given permission to launch a pension scheme mutual fund which will be a great offering for those who want to plan for their retirement through the mutual fund advantage option of better returns from a well managed varied portfolio. The new fund will be an open ended retirement scheme fund and is only third in line of such funds.

The previous two options provided by UTI and Franklin Templeton. The scheme offered by Reliance is basically 2 plans with different portfolios and schemes.The part which generates income works like a debt fund and equity orientation is for the one which is committed to wealth creation.

Such funds are rare since the tax department hardly notified new mutual fund plans for tax rebate which acted as a deterrent for many. SEBI has envisioned a growth path for the MF industry by championing a new type of funds called MFLRP or Mutual Fund Linked Retirement Plan which is similar to the 401(K) option there in US and will complete with the EPF option presently given by the government. They will invest in equities and will require dual contributions from both Employee and Employer with around 8% as returns.

The CBDT it seems has finally come around and has given the Reliance scheme 80C benefits and the MFLRPs are also expected to get similar benefits. SBI, DSP Blackrock, Birla Sun life, Axis and IDBI have such retirement centric mutual find schemes in the offing and are waiting for the regulators’ approval. The money in such schemes will be locked in for 5 years and will have very manageable exit loads.

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