To accumulate wealth for retirement the first thing you need to know is how much retirement corpus is required and when, considering all the factors which we discussed above. You need to consider the desired retirement age, the life span post retirement, the inflation during both pre and post retirement period and finally the average return that you would obtain while accumulating funds as well as during the retirement phase to calculate the retirement corpus required. Once you are clear about it then you can think about the options available to accumulate.

Accumulation products available in India for Retirement

8. Employee provident fund and employee pension scheme: This is the natural and mandatory choice for all the employees working in government, semi government, PSUs and corporate sector. This scheme is run by central government and provides an interest rate of 8.1%. The employer as well as employee contributes 12% of employee’s basic salary. Few employees increase their contribution of EPF but that is not a prudent strategy as other better options are available. EPF has E-E-E tax benefit.
9. Public Provident Fund (PPF): Self-employed and workers of unorganised sectors who are not entitled for EPF can open a PPF account which is again a sovereign guaranteed investment account. The current interest rate is 7.1% with an annual limit of 1.5 lakh and has E-E-E tax benefit.

• National Pension Systems: This scheme is open to all citizens of India but more beneficial for those not covered under EPF. NPS is run by the PFRDA who appoints professional fund managers to manage the fund. As NPS has equity exposure the long-term returns are better than EPF and PPF. The NPS has additional tax benefit of 50000 over and above the regular 80C limit.

1. Pension plans from Life insurance companies: Life insurance companies offer insurance cum investment plans which provides annuity income post retirement. The returns from these plans are generally less than inflation hence one should be careful before investing.
2. Pension Plans from Mutual funds: This option is available to investors post 2018. They provide a mix of equity and debt-oriented investments in order to maintain efficient return with stability. The tax benefits are similar to life insurance pension plans and has a lock in period of 5 years. Investment can be done via SIP or in lumpsum.
3. Equity mutual funds: An equity mutual fund is an aggressive option for the wealth accumulation but if your retirement is more than 10 years away then highly effective option because equity as an asset class provides the highest returns over the long term. Moreover, you can save taxes by using ELSS option. You can do regular savings by way of SIP as well as lumpsum investments.

A disciplined investing, suitable asset allocation among various options available and a regular review will increase the chances of reaching the desired retirement corpus. Once you retired with the adequate retirement corpus the next challenge is utilising the corpus as per the plan.

Postretirement the first objective is to have regular(monthly) stream of retirement income generally called pension to cover monthly expenses and to live comfortably. Only government employees right now are enjoying this benefit. The employees covered under employee pension scheme has some amount of pension but not sufficient enough to live comfortable life. Most retires has to invest their accumulated corpus wisely to get regular monthly income.

Potential sources of regular retirement income

1. Annuities – Annuities have been used for the retirement income for many years. Annuity is an insurance product in which you need to make an investment and it makes payments to you on a future date. The payments are determined on length of your payment period. It is a contract which can not be reversed so one has to be careful choosing the right option.

Types of Annuities

• Immediate Annuity: This type of annuity plan is purchased with a lumpsum amount and the pension begins immediately. This is the most preferred annuity plan.
• Deferred Annuity: This plan has two phases, the accumulation phase and the vesting phase. During the accumulation phase the policyholder makes a regular contribution or lumpsum payment and allow investment to grow till vesting date. On reaching vesting date the pension begins.

These are commonly used annuity plans in India.

              Options in Annuity plans

• Period Certain Annuity
• Life Annuity
• Life Annuity with survivor option
• Life Annuity with return of purchase price
• Joint Life Annuity with return of purchase price
• Increasing Annuity

As you can see selecting the right annuity plan for you is not easy as every type and every option has its own merits and demerits. More over though annuities offer fixed regular income, the interest rates offered by annuity plans are not that attractive hence a part of retired income can be opted from annuity plan.

1. Government sponsored regular Income Scheme

The government has introduced several schemes in order to provide regular income to its senior population

• Senior Citizens Savings Scheme (SCSS): This is a sovereign guaranteed monthly income scheme for senior citizens aged above 60 years. The recent rate of interest is 7.4% p.a. Minimum Deposit is Rs 1000 and the upper limit is Rs 15 lakhs. Only one deposit and lumpsum is allowed in the scheme. The scheme has maturity period of 5 years which can be extended by 3 years. The interest is paid out quarterly, directly into the depositor’s account.
• Post Office Monthly Income Scheme (POMIS): As the name suggest this scheme is run by post offices and recognised by the ministry of finance to provide monthly payments to senior citizens. The current rate of interest is 6.6% p.a. The min investment is Rs 1500 and max investment is 4.5 lakh. For joint account max investment is 9 lakhs. The maturity period is of 5 years. The interest payment is disbursed monthly.
• Reverse Mortgage: This option is not so popular in our country but it is very useful for people who do not have either a fixed monthly income or a sufficient corpus post retirement. They can apply for a mortgage of their self-owned property and receive tax free monthly income. They can continue to remain the owner of the house and continue to occupy the house till the death of last surviving spouse.

• Systematic Withdrawal Plan (SWP): Instead of going with annuity plans which are offering low interest rates and tax as per slab rate, one can choose the option to take systematic withdrawal form mutual fund schemes or pension schemes from mutual funds. Under this option a specified amount on a selected date can be withdrawn every month from the accumulated corpus. The hybrid mutual funds are ideal for this type of investment as it offers returns better than the inflation rates and are relatively less volatility. You can increase or decrease the withdrawal amount as per your need. Under SWP there is a benefit of Rs 1 lakh exemption on capital gain in the financial year hence highly tax efficient. Since there is potential for higher returns over long term in SWP, your monthly withdrawals are relatively higher than annuity. Moreover, you can adjust your monthly withdrawals considering inflation which is not possible with annuity or other fixed regular income schemes. SWP proves to be the most sensible investment option for regular retirement income if you select the right mutual fund scheme.

As you can see for a stress-free retired life, you need to have clear idea about what type of retirement life you want to live, how much corpus is required to live your desired retirement life. How much you need to save and in which investment options and for how long. Post retirement which options to choose from the various options available for your regular retirement income and for your other desires. This requires a careful planning, appropriate investing, periodic evaluation and modification of your plan.

An advice from a qualified financial advisor is always a better option to sail through this journey comfortably rather than trying something on your own.