Retirement Mutual Funds: Why should you opt for these schemes? 3 key reasons explained

For retail investors, securing financial stability for retirement and funding their children’s education stands as crucial financial objectives. Besides a diverse range of equity and debt mutual fund options, investors can consider specialized policies tailored for retirement planning.

Within the broader category of solution-oriented schemes, there exist 27 retirement mutual funds, boasting a total asset size of ₹24,489 crore. These retirement funds typically come with a lock-in period of five years, encouraging investors to maintain long-term commitment towards effective retirement planning.

Another notable subset is children’s funds, comprising 11 schemes with a combined asset under management of ₹18,736 crore, as per the latest data from the AMFI (Association of Mutual Funds in India) as of January 31, 2024.

Why Consider Investing?

1. Long-Term Wealth Accumulation: Retirement schemes are designed to foster long-term wealth creation. Particularly for individuals who haven’t subscribed to options like NPS or PPF, these funds offer a means to build a substantial corpus to support them in their old age.
2. Combatting Inflation: Despite diligent retirement savings, inflation can significantly undermine financial goals. Accumulating sufficient investments can safeguard against the erosive effects of inflation, ensuring a comfortable lifestyle during retirement.
3. Lock-In Period: Similar to other solution-oriented schemes, retirement mutual funds come with a five-year lock-in period. This feature encourages investors to maintain a long-term investment horizon and maximize their exposure to equity markets.

Leading Retirement Funds:

Among the most prominent retirement mutual funds based on asset size are HDFC Retirement Savings Fund – Equity Plan, UTI Retirement Fund, Nippon India Retirement Fund – Wealth Creation Scheme, SBI Retirement Benefit Fund – Aggressive Plan, Tata Retirement Savings Moderate, and Tata Retirement Savings Progressive.

Top-Performing Funds:

The top-performing retirement mutual funds have delivered impressive one-year returns ranging from 35% to 52%. Notably, ICICI Prudential Retirement Fund – Pure Equity Plan boasted the highest return at 52.8%, while other schemes yielded returns in the range of 35% to 44% annually.