I am 34 years old and my monthly salary is Rs 48,000. Which pension plan should I take? I plan to retire when I turn 50 years. How much should I invest in the plan to create a retirement corpus?
Rajesh Kumar, Noida
You have 16 more years before your plan retirement, which is a good ten years before the time most people take retirement. Considering increasing longevity and rising cost of living; you will need to save as much as you can to create an income stream in your retirement.
Pension is a two part activity—accumulation of funds and then a payout from that accumulation.
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You need to focus on the first part of accumulation, where the sum that you contribute into a pension plan is deployed and grows in value. This growth will depend on the instrument of choice. For instance, if you increase your contributions to a provident fund that pays out a fixed return, you will not be able to grow your retirement corpus much, because the returns on these are reducing each passing year. However, if you invest the same in a market-linked instrument like a pension policy or mutual fund, the chances of it going up in value is more. Moreover, how much you save towards your retirement will also depend on how much you have already saved so far towards this goal. The risk that you can take with investments will decide the type of investment vehicle that you choose. The corpus that you wish to build will also depend on the monthly payout you plan from it and the number of years the corpus will see you through retirement.
