How to Handle Retirement Investment

Retirement brings along with it a change in earning, spending, and saving. In earning years, the primary income is from salary/business earnings, while in retirement, the primary income is generated from investments made in those years. In retirement, spends on travel and other activities go up considerably while savings drop.
Therefore, a crucial investment objective that most of us have is to build up a sizable corpus that is sufficient to churn out adequate income during our retirement years. Nevertheless, many of us often feel overwhelmed with the mere thought of retirement and how we can work towards building a substantial retirement corpus.

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However, planning for retirement as much in advance as possible can take away a big part of retirement worries. Carefully planned retirement investment strategies have dual benefits – firstly, they help identify what must be done at present to lead a particular lifestyle post retirement, and secondly, help you avoid pitfalls in retirement years.

A good retirement planning should factor in aspects like the age for which retirement is planned, the corpus required and the number of years remaining to build it. The overall focus should be on saving to the maximum extent possible so that retirement can happen when desired and our money is not outlived.

How to Plan Retirement

The first step towards retirement planning is calculating how much money will be needed regularly once retirement sets in. It is essential to factor in inflation year-on-year and set aside a higher principal amount to generate a higher income with progressing time.

The investment amount may be kept in a bank deposit, monthly income plan, or other such investment avenues that guarantee a regular income. To ensure that the retirement corpus grows in value, investing in equity is also recommended. However, equity investments are risky and in case markets crash in the year of investment, recovery may take a long time. Therefore, keep only that part of the corpus in equity that you do not need access to or have to withdraw from immediately. Once the value begins appreciating, consider transferring it to your other income-yielding investments. For instance, if you invest 30% in equity and 70% in other income-yielding investments, then review it periodically and accordingly move your gains or fund your losses to ascertain that under any circumstances, the 30% limit in equity is not exceeded.

Wise asset allocation supplements savings, helps earn income at regular intervals, and also allows a substantial corpus to grow to meet retirement goals while making the necessary adjustments for inflation.

Assuming you are a 40-year old individual who would like to have an income of INR 50,000 per month after retirement, an ideal retirement corpus would be INR 2 crores, created over 20 years. Assuming annualised returns of approximately 12%, a monthly investment of INR 22,000 is recommended through SIP in equity funds. Even if this exact amount cannot be currently afforded, beginning with whatever is feasible helps make some headway.

An ideal way is to chalk out a budget for monthly expenses while taking care to avoid certain discretionary expenses since this will allow investing more. Irrespective of market conditions, the investing process must continue. Long-term investors always benefit from stock market vicissitudes because investments made during market downturns bring down average costs.  

You may also like to read: Types of Annuity | Annuity Calculator

Have a Diversified Portfolio

Selecting appropriate investment options is the key to successful retirement planning. Extremely conservative investments could dent the chances of accumulating the required retirement corpus. For a long-term investment goal like retirement, the portfolio must have a sizable amount of money in effective investment options like equity and equity-oriented options and mutual funds. Besides this, investing in pension funds that are offered by mutual funds is a wise step towards reaching your retirement goals.

The exact allocation should be based on overall financial liabilities, desired size of the retirement corpus, and income requirements. It is best to pick a fund on the basis of your asset allocation, and this should ideally be according to the amount of time left before retirement.

Tax benefits can also be availed under section 80 C of the Income Tax Act towards these kinds of investments. Additionally, long-term capital gains on funds, which invest 65% and above in equities are tax-free.

Doing Away With Traditional Approaches

Aging populations significantly contribute to the need to make provisions for adequate retirement and health benefits. Adding further to the complication is the constantly increasing inflation and resultant high cost of living that grows at an accelerating rate relative to income. This increases the importance of the need for greater retirement funding.

To reach this important goal, traditional approaches to retirement must be changed. One approach is pushing for a heavy savings culture and another is assumed family support - in most Asian cultures it is widely assumed that grown children will take care of their aged parents. While high savings may be difficult to sustain with continually rising costs of living, it is neither always the case that children look after their parents, given the increasing ratio of parents/grandparents to their working children. It is therefore very important to meticulously plan and save for one’s retirement years.

Types of Pension Plans

  • Pension funds
  • Pension plans – with and without cover
  • National Pension Scheme (NPS)
  • Annuity certain
  • Life Annuity
  • Immediate Annuity
  • Deferred Annuity          
  • Guaranteed Period Annuity 

A Look into Some of the Preferred Pension Plans in India This Year

Plan name

Sum assured

Annual premium - INR

Aegon Life Guaranteed Income Advantage Insurance Plan

Minimum - 1 lakh


Subject to underwriting.

Bajaj Allianz Retire Rich


Minimum - 15,000

HDFC Life Assured Pension Plan – ULIP retirement plans

Minimum - 24,000 

Maximum – No limit

Subject to underwriting

HDFC Life Guaranteed Pension Plan


Subject to underwriting

HDFC Life Personal Pension Plus

Minimum - 2,04,841 

Maximum - Depends on age, term, and premium


Equal to the policy term

LIC Jeevan Akshay VI

500 monthly

Subject to underwriting

LIC New Jeevan Nidhi

1 lakh

Subject to underwriting

Reliance Immediate Annuity Plan


Subject to underwriting

Reliance Smart Pension Plan

Subject to underwriting


SBI Life – Saral Pension

Minimum - 1 lakh 

Maximum – No limit

Equal to the policy term or Single Pay

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply

Selecting the Right Retirement Plan

Understanding Retirement Needs and Planning Options

Retirement planning begins with a clear understanding of how much money you will require for maintaining a good lifestyle for yourself and your dependents. It is crucial to make room for inflation since this helps to account for increased future expenses.

When it comes to retirement planning options, the one-size-fits-all approach does not work. It is best to compare retirement plans, pension scheme and provident funds offered by various insurance and asset management companies and then get a plan in line with your specific needs.

Research and Product Understanding

The market is flooded with numerous retirement planning solutions. All pension plans indicate the kind of income that will be receivable, the frequency of the receivable income, guaranteed amount, how much of the income is linked to market performance, etc. Your exact retirement needs will define the kind of plan you must opt for.

After making your retirement planning calculations, pick a plan which can generate the retirement income you require at the preferred frequency.

Looking Beyond Just Tax Benefits

Though important, tax benefits should not be the sole consideration when looking at retirement/pension plans. Focusing only on tax benefits is a sure shot way to not be able to build up a substantial retirement corpus. It is best to make detailed calculations about retirement planning and then invest as much as would be essential towards building a sizable retirement corpus, and thus securing your future. You can also consider pension calculator for better calculation. 

You may also like to read : Benefits of National Pension Scheme

General Tips for Retirement Planning

  • Start investing as early as possible, even if this means investing small amounts - For every 10 years delay in starting the investment process, you will have to invest three times more every month to catch up 
  • The longer money stays invested, higher will be the benefits from the power of compounding 
  • Always make room for inflation in your retirement calculations 
  • To achieve your goals quicker, consider investing in high-return long-term asset classes such as equity mutual funds – the expected annualised return is around 14% in the long run 
  • Aim to invest at least 30% of your salary to accumulate a sizable retirement corpus 
  • It is ideal to up your savings/SIP amounts annually by minimum 10%, or higher, in line with your increased income 
  • Though it is safe to invest for retirement in traditional options like PPF, EPF, Senior Citizen Savings Scheme, post office Monthly Income Scheme, bonds, bank FDs, etc., putting too much emphasis on these investment options does not help to keep pace with growing inflation. It is better to focus more on ‘growth’ during the accumulation phase
  • Look at the tax implications of your investments, some investments are not tax-free on maturity 
  • Regularly review how your money is growing and how it will continue to grow in future
  • Avoid withdrawing during the process of building your retirement corpus at all costs. Although it is alright in case of unavoidable situations that may absolutely necessitate withdrawals, if it is made a habit, it could become extremely costly when retirement arrives 


If you have not yet started channelling your investments towards retirement planning, begin at the earliest. The gravity of retirement should be understood, followed by a serious commitment to tread on a disciplined investment approach. If you are a late investor, the best way to make amends is to start investing at the earliest, after determining your time horizon and the corpus you would need to lead a comfortable retired life. These two factors will help work out how much exactly you would need to invest at regular intervals to achieve the desired retirement corpus. Though it is great to start investing early, it is never too late to begin. Start now.

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