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10 Best Retirement Investments In 2021

Read this blog to know the 10 best retirement investment options for 2021.
December 2, 2020

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Retirement is a bittersweet moment that marks the beginning of a relaxed life. However, stats indicate that not everybody takes retirement seriously.

If you are someone who wants to invest in the right options today for a comfortable retirement tomorrow, this blog is for you.

We will walk you through 10 investment options that can help you manage your expenses after retirement. We’ve also included 3 bonus investment options that you can choose from! 

The 10 Best Retirement Investment Options

1. Indian Stocks

The Indian stock market is a long term investment tool with historical returns ranging from 9-16%. Stocks are divided into 3 categories:

  • Large-cap stocks (blue-chip stocks)
  • Mid-cap stocks
  • Small-cap stocks

You’d be interested to know that there are 4000+ companies that trade on the NSE and BSE. Let’s take a look at the broad set of benefits and risks of Indian stocks.

 

Benefits

Risks

Potentially high returns over 5+ years

Highly volatile

Post-tax returns that beat inflation

Market-based risks

Diversification 

Company based risks

2. Debt Mutual Funds

Debt mutual funds invest in money market instruments or debt instruments like treasury bills, bonds, etc. Historical data suggests that debt funds may give returns better than a bank savings account. 

The returns range from 7-9%. Debt funds also include short term investment vehicles like liquid funds, ultra short term funds, and overnight funds. 

 

Benefits

Risks

Less volatile than other mutual funds

Interest rate risks

Highly liquid asset

Credit-based risks

Better returns than a bank fixed deposit or savings a/c

Bond issuer defaults

3. Equity Mutual Funds

Equity funds invest in stocks to deliver long term capital growth. Equity funds are classified into 4 categories based on the type of stocks they invest in:

  • Large-cap funds
  • Mid-cap funds
  • Small-cap funds
  • Multi-cap funds

Historically, equity funds have been known to give returns between 8-16%. Let’s take a look at the pros and cons of equity mutual funds at a glance. 

 

Benefits

Risks

Potentially high long term returns

Highly volatile

Tax-free returns beyond a holding period of 12 months

Market-based risks

Professionally managed

Change in fund objective

4. Retirement Funds

Retirement funds invest in stocks or debt instruments to generate income through returns for post-retirement. Retirement funds are also known as pension funds. 

 

Benefits

Risks

Low risk - Fixed Returns

Improper fund management

Contributions tax-exempt up to ₹1.5 Lakh

Unit-linked schemes may be volatile and risky

Monthly annuity or lump sum payment post-retirement

Inflation based risks

5. Public Provident Fund (PPF)

A Public Provident Fund (PPF) is a long term, government-backed savings scheme that also generates a decent interest rate. PPF also carries tax benefits.

 

Benefits

Risks

Low risk

15 year lock-in period

Guaranteed returns

Low liquidity

Tax-free interest

Returns barely beat inflation

6. National Pension Scheme (NPS)

The National Pension Scheme is a post-retirement, income-generating option backed by the government. NPS requires an individual to contribute a fixed amount during their working years.

 

Benefits

Risks

Better returns than PPF

Market-based risks

Investment flexibility

Lower tax benefits compared to ELSS funds

Tier I contributions tax-free up to 25%

Lock-in period until the age of 60

7. Rental Income

A rental property can generate passive income in the form of a rent or lease. However, buying a rental property requires a lot of effort and a large initial investment amount. 

 

Benefits

Risks

Generates passive income

Low liquidity

Tax benefits

Exorbitant real estate prices

Value growth

Maintenance costs

8. P2P Lending

Peer to peer lending (P2P lending) can generate a recurring monthly interest usually known as passive income. The interest rate is generally based on the lending tenure and can range from 9-14%.

 

Benefits

Risks

Recurring monthly interest

Loan default

Potentially high returns

Late payments

Thoroughly vetted borrowers

Market-based concerns

Watch this video to know more about P2P lending

9. Gold

While gold can’t generate passive income, the inflation hedged profits can be useful during an unexpected emergency or expense after retirement. This would, however, require you to sell gold.

 

Benefits

Risks

Low volatility

Storage costs

Can beat inflation

Making charges

High liquidity

Security concerns

10. Senior Citizens' Saving Scheme (SCSS)

Senior Citizens' Saving Scheme (SCSS) is a post-retirement investment option for Indian citizens over the age of 60. It is a government-backed investment option. There’s a 5 year lock-in period.  

 

Benefits

Risks

Fixed interest rate

5 year lock-in period

Guaranteed safety & returns

Account closure penalty (before 2 years)

3 Bonus Investment Options For Retirement

1. US Stocks

Benefits

Risks

Potentially high returns

Currency based risks

Value of USD

Country based risks

The biggest market in the world

Regulatory risks

 

2. Exchange Traded Funds (ETFs)

Benefits

Risks

Comparatively low expense ratio

High volatility

High liquidity

Brokerage fees

Better tax benefits compared to mutual funds

Counterparty Risk

3. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Benefits

Risks

Guaranteed pension payout

Pension amount taxable

Assured rate of return

5 year lock-in period

If you want to pay your future self, watch this video

Summary

Retirement is not easy. But you can pay your future self by investing in the right options today. The assets mentioned above can help you plan your retirement portfolio. Each investment comes with its own set of risks and benefits. So it is recommended that you speak to a trained financial professional before making an investment.

Investment Facts


Shriram Shekhar
Shriram is a Content Marketer at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. Shriram’s love for philosophy, product development, and empowering people through quality content is what got him to Cube Wealth.

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