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How to use Mutual Funds for Retirement Planning?


Retirement planning is crucial for everyone. When you start your career, you may be focused on covering discretionary and non-discretionary expenses. As a result, you may leave retirement planning for a later stage in your life, thinking you can make up for the lost time by investing more in the future. However, investing from a young age can have many benefits, the biggest of them being the power of compounding that grows your wealth exponentially.

Using mutual funds for retirement planning can be an excellent strategy. Mutual funds allow you to invest in SIPs (Systematic Investment Plans) as well as in lump sum, offering you the flexibility to build a significant retirement fund overtime at your preferred pace. 

How to use a mutual fund for retirement planning?

Here’s how you can use a mutual fund for retirement:

Use different asset classes:

Mutual funds can offer you inflation-beating returns with varying classes of assets that can be adjusted to your risk appetite. Typically, equity mutual funds have shown the highest returns over a long investment horizon. However, they are also akin to some risk. Despite that, with a 12% average rate of return, investing in equity mutual funds over the long term can help you garner high returns. So, adding equity mutual funds can be an excellent strategy to accumulate more funds, at least in the younger years of your life. As you age, you may want to reduce the risk exposure from your portfolio. In this case, you can move to hybrid mutual funds and finally balanced or debt mutual funds.

Solution-oriented funds are another excellent choice for retirement planning. These mutual funds have a lock-in period of five years, making them more stable. Moreover, since they primarily invest in equity securities, they are ideal for long-term goals like retirement planning.

Additional Read: NPS Features & Benefits you need to know

Pick the SIP method:

SIPs help you make periodic contributions at a frequency that suits you. The lowest SIPs can be Rs. 500 only, and there is no higher limit for it. So, you can invest as much or as little as you want. SIPs can offer you the flexibility to monthly/ quarterly/ half-yearly/ yearly instalments. You can also choose the SIP amount and change it over time as you grow in your career or earn more. SIPs offer several other benefits too.

For example, rupee cost averaging offers a hedge against market volatility. This happens because you can buy more units when the market is low and fewer units when the demand is high. In addition to this, SIPs are very convenient. They go automatically from your account and invested in the mutual fund scheme of your choice. Moreover, they are great at instilling financial discipline.

Use mutual funds to save for emergencies:

Emergency savings are a vital component of retirement planning, and liquid mutual funds are a suitable instrument for them. You can park your funds in a liquid fund as they invest your money in money market instruments for only 91 days. Being true to their name, they are highly liquid too. You can redeem your funds within 24 hours. Moreover, they ensure that your money does not sit idle but grows in value.

Additional Read: NPS Investments Tax Benefits


Using mutual funds for retirement planning can offer your financial security in your old age. It can ensure that you stay financially independent and live a comfortable life. Mutual funds also offer tax saving solutions that further strengthen your earnings. Moreover, with easy options like SIPs, they provide you with a simplified route to investment. So, you do not feel financially burdened and can continue investing for a long time without compromising on present goals. 


ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.

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