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What Is The Best Retirement Plans For The Self-Employed?

For employees, EPF offers the most secure and attractive option for retirement planning. Self-employed individuals also have retirement planning options, but they are frequently overlooked.

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Amit Sethi
November 22, 2023
Retirement plans for self-employed

Retirement plans for self-employed

Self-employed individuals lacking access to EPF must chart an alternative course for retirement planning. While EPF stands out as an excellent retirement instrument for employees, there are equally enticing options available for the self-employed. Here are some of the Best Retirement Plans for Self-Employed individuals.

Explore some appealing plans in the market tailored for self-employed individuals.

Government Schemes

There are several government schemes available in the market offering attractive rates of returns as well as safety of investments. Schemes such as the Public Provident Fund (PPF) and the National Pension Scheme (NPS) are designed to help old people earn a decent return on investment.

You can regularly invest in such schemes, i.e., in monthly mode, as it inculcates investment discipline. You can also invest a lump sum amount in such schemes. PPF, NPS, SCSS, and most government schemes also allow tax deduction benefit u/s 80C.

Mutual Funds Specially Built For Pension

Asset management companies (AMCs) have launched multiple funds to serve the purpose of pensions for retirees. These funds invest a major proportion in debts and a small portion in equity. Pension funds are relatively much safer compared to equity mutual fund schemes.

However, mutual funds also offer other funds that can be used to build a corpus for your retirement requirements. The funds are of various types. Some are equity-oriented, such as blue-chip funds, small-cap, multi-cap, sectoral, and even theme-based funds. Some can be debt-based, such as Govt bonds, corporate bonds, and deposit schemes. Finally, some funds invest in both equity and debt.

Select the funds as per your risk appetite and investment horizon. While equity funds can be volatile in the short term, they have been shown to create better returns in the long run. Choose the appropriate mutual fund scheme for your retirement, depending on your risk appetite and return requirement.

Retirement Products Offered By Insurance Companies

Insurance companies provide pension plans, offering a monthly annuity income to investors, known as annuity plans. There are two primary variants: immediate and deferred annuity. Immediate annuity plans commence payments upon investment, while deferred annuity plans involve investors contributing for a set number of years before the annuity flow begins. Opting for a deferred annuity plan is advantageous, as it leverages the benefits of compounding. It’s important to note that annuity incomes are subject to taxes at rates applicable to individuals.

Self-employed individuals can access pension plans similar to those available for employees, although employees enjoy a slight advantage with the option to invest in the EPF. The remaining plans are accessible to everyone. With careful planning and avoiding common pitfalls, self-employed individuals can establish an effective pension plan, thereby building a substantial corpus for a comfortable retirement.

 

The author is an independent financial journalist

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