Mutual Fund SIP, NPS, SCSS or PPF: The retirement plan becomes very important when after an age, ie, in old age, there is no means of regular income. Employed people usually consider options like government schemes, systematic investment plans (SIPS. The biggest challenge comes when a human has limited money for retirement and both government schemes and stock markets. The best strategy in this situation can be confused about which option in which options you get to know about the possible returns in which you want to save your saving during that time.
For example, if you want to invest in a government scheme, then you can get information about the interest rate received in it. Also, you can also understand the aspect of how much maturity value will be in the next 10 to 20 years if you invest money in the government scheme. Similarly, you can check the average return of the mutual funds in which you want to invest and take a decision to invest accordingly. Which of both the government scheme and SIP can be better, understand the aspects given here and take a decision.
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Investment through SIP
SIP enables investors to invest a certain amount in a regular mutual funds. This option promotes the habit of saving in people. Adil Shetty, CEO of Bankbazar.com, says that there is a market risk in SIP, but it has given a return between 12% to 15% annually in the last few years. Although these returns are not guaranteed, this investment option can prove to be helpful in facing inflation and raising large funds.
Let us now take a look on the government scheme.
Government schemes
National pension system (nPS)
NPS is a government regulated retirement savings scheme in which management costs are low. This is a market linked scheme. It can usually get a return between 8% to 10%. People investing in NPS can claim tax deduction up to Rs 2 lakh under Section 80C of Income Tax and 80 CCD (1). In the scheme, it is necessary to buy a stable income after retiring at the time of retiring.
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Senior Citizen Saving Scheme (SCSS)
The SCSS is specially designed for individuals aged 60 years or above. It provides a fixed interest rate of 8.20% per year, which is five years, which can be extended for three years. The earned interest is taxable according to the investor’s income slab, but the scheme provides a safe and estimated return.
Public Provident Fund (PPF)
PPF is a long-term investment option with a 15-year lock-in period. Currently it offers an interest rate of 7.10% per year. Contribution to PPF is eligible for tax deduction under Section 80C, and returns are completely tax-free. This plan is popular for its safety and tax benefits.
In which investment option, how much returns will be received, understand from calculation
Let us compare the possible results of investing Rs 10,000 monthly for 20 years in each option.
SIP
Assuming an average annual return of 10%, your investment will be around 76 lakhs.
NPS
With an average return of 9%, this amount will be around 66 lakhs.
PPF
The total amount will be around Rs 52 lakh at 7.10% interest rate.
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SIP is likely to have high returns, although with market risk. On the other hand, government schemes like NPS and PPF provide stable, estimated returns and tax benefits, which make them suitable for risk -avoiding investors. A balanced retirement portfolio can include both SIP and government schemes that correspond to personal financial goals and risk tolerance. Therefore, you can create your retirement portfolio based on appropriate financial goals and needs.
(Credit: Sanjeev Sinha)