When it comes to retirement planning, deferment/postponement is normal, especially among the youth. At the earlier stages of our careers, it is fairly easy to believe that planning for our retirement is something that can be put off to a later date. During this time, investing in tax saving funds becomes an immediate priority, and understandably so. Tax is an expenditure that can consume a significant chunk our income/investment returns. It is, therefore, not surprising to see that today’s millennials invest most of their money in tax saving ELSS schemes, NCS, RPF, etc.
However delayed the onset of retirement may be, a lot of smart millennials today are killing two birds with one stone. They are preparing for their retirement and saving tax as well. HDFC Retirement Savings Fund (the Fund) is a mutual fund scheme that strives to offer investors this dual benefit. It is a notified pension scheme under section 80C of the Income-tax Act, 1961. Investing in the Fund can offer a deduction of up to Rs. 1,50,000 from our taxable incomes. For an investor in the highest tax bracket, this translates to tax savings worth Rs. 46,800 every year (ignoring surcharges). Young investors can consider investing in the Fund and availing the twin benefits of saving tax and building a retirement corpus.
The importance of building a corpus large enough to support us sufficiently after retirement should not be belittled, especially in a country like India. The relative lack of penetration of retirement benefits in India and weak social security infrastructure make retirement planning all the more crucial. The ever increasing medical costs and life expectancy figures also cannot be ignored. Procrastination can be costly too – a delay of 10 years in investing for your retirement corpus can reduce your total retirement corpus by more than 50%, even though the total amount invested is the same overtime. Therefore, the earlier we start, the more our money works for us.
Fortunately, mutual funds have proven to be wealth creation avenues in the long term, and among them, HDFC Retirement Savings Fund offers investors a suitable platform to fulfill their retirement needs.
Every investor has a unique tolerance towards risk, and no two investors can have the same asset allocation. HDFC Retirement Savings Fund (“the Fund”) is a pension scheme that offers investors 3 different plan options - the Equity Plan, the Hybrid Equity Plan, and the Hybrid Debt Plan. Equity Plan offers the highest exposure to equities, and Hybrid Debt Plan the lowest. Investors can, therefore, invest in a plan that better suits their risk-return profile and their stage of life.
The fund has a lock-in period of 5 years or until the age of 60 - whichever is earlier.. When a specific portion of income gets locked-in and earmarked for our children’s future, investors automatically rationalize their spending on other personal/social requirements. The Fund encourages long term holding of investments, which plays an important role in building a sizable corpus over time.
Overall, thorough retirement planning helps us balance our current aspirations vis-à-vis our future requirements, and therefore, HDFC Retirement Savings Fund may work as an efficient investment avenue to achieve that perfect balance.
The views expressed are author’s own views and not necessarily those of HDFC Asset Management Company Limited (HDFC AMC). The views are based on publicly available information and other sources believed to be reliable. Past performance may or may not be sustained in future. HDFC Mutual Fund/HDFC AMC is not guaranteeing returns on any investments. The views are not an investment advice. Investors should obtain their own independent advice before taking a decision to invest in any scheme.
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