What Are Different Retirement Plans?

After retirement, your financial goals will depend a lot on your expected cash flows from various investments. So, it's crucial to know about the different retirement plans available in the market.

Amit Sethi
November 17, 2023
Retirement plans

Retirement plans

Retirement plans are important for everyone because that’s the period when everyone has to go through the last stage of their life. But what are the various options available in the market, and how do you choose the right one? Let’s check out some of the popular retirement plans available.


Pension Funds By AMCs

These funds are offered by Asset Management Companies (AMCs). Pension funds invest your money in equities, debts, or a mix of them. The risk varies depending on the asset mix. A pension fund with a high allocation in equity will be riskier than the one with a lower allocation in equity.

Since pension funds invest for your retirement, they usually take little risk. Hence, the underlying investments in pension funds are either debt or a debt-equity mix with a higher allocation in debt.

You can invest in pension funds via the systematic investment plan (SIP) route, where a certain fixed amount can be invested directly from your account. It serves two purposes: one, it frees you from missing it for any reason, and two, it enforces discipline.

Some pension funds also provide a life cover option as part of it. The premium will certainly go up for such funds because of life cover. Try to keep your insurance and investment needs separate.

National Pension Scheme (NPS) & Other Government Schemes

NPS has gained huge popularity among investors in recent years because of the choices it offers. NPS invests in a mix of equity and debt. Investors can select the proportion of equity and debt based on their risk profile and investment horizon.

Investors can choose between auto or active options to manage their funds. In the auto option, the mix of equity and debt changes as per the investor’s age. In the active option, investors can change the combination on their own.

The general rule, however, is that there should be little risk involved in a retirement plan. If you do not know much about investment risk, it is better to select the auto option and let the fund managers take care of it.

Apart from NPS, other schemes such as the Public Provident Fund (PPF), Employees’ Provident Fund (EPF), post office monthly schemes, and many others are there to help people invest for their retirement.

Annuity Plans By Insurance Companies

Annuity plans normally offer four variants: immediate annuity, deferred annuity, fixed annuity and variable annuity plan. Immediate annuity plans start paying monthly income immediately. Deferred annuity plans start paying monthly income after you retire. It is advisable to invest in deferred annuity plans when you are in your professional career. In a fixed annuity, the return is guaranteed for the specified tenure; on the other hand, in a variable annuity, the return keeps fluctuating depending on market conditions.

Compounding will work to your advantage if you start investing early in the annuity plans.

How To Select The Right One?

The selection of a retirement plan depends on your risk appetite and investment horizon. A young professional with 30-40 years investment horizon can afford to select a pure equity fund or can choose a fund with a higher equity allocation under NPS, while a professional with an investment horizon of less than 10 years or closer to retirement may go for pure debt funds or schemes such as PPF or Government bonds.

The author is an independent financial journalist

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