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Introduction to Mutual Funds for Retirement

Is mutual fund investing a sound retirement investment? The article discusses how mutual funds can benefit retirees, their taxes, and how to invest in them. Click to know more.

The goal of planning for retirement must be to figure out the income you require post retirement. Once you know the amount, with inflation considered by the age you retire, you can then narrow down your options for reaching your goal. As far as investment opportunities for retirement go, mutual funds are one of the go-to instruments. Retirement financial planning has to be done when you are young, as it involves planning for the long term. The best mutual funds for retirement can see you through major financial milestones during your golden years. 

A mutual fund is your best plan for a retirement fund as it invests your wealth in securities that give you returns over a long span. The securities your fund may invest in could be of equity, debt, or both, such as a hybrid fund, if you wish to mitigate your risk level. 

The Best Mutual Funds for Retirement to Invest In

The plan you make for your retirement should not just involve saving, but growing wealth to maintain your current standard of living during your retirement. In addition, you will need funds for emergencies at a time when a regular income source is absent. Also, the best mutual funds for retirement should provide you with diversification in your financial portfolio, and lower risks. Here are some of the best mutual funds for retirement: 

Fund Name AUM (Cr)3 Year 5 Year
DSP Flexi Cap Fund7,395.22 Cr 15.71%12.14%
Nippon India Retirement Fund2,189.62 Cr7.74%6.71%
HDFC Retirement Savings Fund2,124.78 Cr19.90%14.36%
UTI Retirement Benefit Pension Fund3,545.55 Cr11.07%7.22%
Tata Retirement Savings Fund1,170.35 Cr12.36%10.36%

Who should invest in mutual funds for retirement?

The best mutual funds for retirement grow and build your capital into a substantial corpus. While thinking of retirement, individuals often consider pension plans, EPF or Employee Provident Fund and Public Provident Fund (PPF). Although these are significant savings schemes with a compounding effect, the corpus you may collect will not suffice for retirement planning. With rising costs due to inflation, and uncertainties to account for, you will need a large corpus to be comfortable for retirement. Anyone and everyone should have a corpus for retirement, barring age or gender. If you are young and starting your career, you can invest in mutual funds that relate to equity at the earliest. If invested for a long term, these funds can give you good rewards. You can then reinvest your newly grown capital. This is how you build your wealth. 

Taxation on Mutual Funds for Retirement 

The best mutual funds for retirement are dedicated retirement plans that offer you tax-saving features. The contribution which is made towards a retirement mutual fund is permitted a tax deduction if it falls under Rs. 1.5 lakh per year. Any withdrawals which are made from retirement mutual funds are subject to a tax liability, according to a corresponding tax slab as specified under Section 80 C of the Income Tax Act. Moreover, there are only some specific mutual funds that can get a tax benefit and these are the ones that are notified by the Central Board of Direct Taxation (CBDT). 

Risks Involved in Mutual Funds for Retirement 

You may have read or heard that oft-repeated phrase that goes like, “mutual funds are subject to market risks …”. Although the best mutual funds for retirement invest your funds in securities which are linked to the market, you can get one that is suited to your individual appetite for risk. There are some mutual funds that invest only in debt instruments like government securities and bonds, giving you safety. Other funds allocate wealth to a combination of securities, including debt and equity.These are hybrid mutual funds for retirement that mitigate your risk, as they involve blends of instruments. Then, other mutual funds you can opt for when you are young (and can afford to take some risks), are those which invest solely in equity. History tells us that  equity held for long periods can yield great returns. 

Return Potential of Mutual Funds for Retirement 

Unlike several conventional retirement plans and schemes, mutual funds don’t guarantee returns. Nonetheless, longer durations of investment help investors to generate substantial returns. The best mutual funds for retirement which invest in pure equity, historically have a higher return generation than in traditional investment channels. Consequently, individuals should exert patience and not be concerned about short- term market shifts.

A Mutual Fund for Retirement’s Compounding Effect with Respect to Time

The best mutual funds for retirement are those that invest in equity in large-cap funds. These funds give you the advantage of compounding in the long run. The longer you maintain the time horizon of investment, the better are your chances of achieving high returns. You can also invest a portion of your capital in multi-cap mutual  funds. Such funds invest percentages of your wealth, each in small-cap and mid-cap companies, along with some wealth allocated in large caps. Small-cap and mid-cap companies have faster growth potential in the long run, and act to compound your investment. Over a period, small caps can turn into mid-caps. In turn, mid-caps can become large caps. So, if you invest in the best mutual funds for retirement, compounding helps you create more capital to meet your financial aims.

Advantages of Mutual Funds for Retirement 

The advantages you get with the best mutual funds for retirement should compel you to invest right away. The benefits are listed below:

  • Liquidity - In a retirement plan of the mutual fund kind, you can choose a systematic withdrawal plan, without having to purchase an annuity. This offers liquidity for any immediate cash requirements.
  • SIP - If you invest in the best mutual funds through a SIP, you can invest a fixed sum on a regular basis to build a corpus for retirement.
  • Flexibility - Mutual funds for retirement give you the flexibility of opting out of plans, through a SIP.
  • No Hassle - Mutual funds for retirement are managed by expert fund managers who know which securities suited a range of investors. 
  • Long-term Rewards/Less Risk - Mutual funds for retirement generate rewards with a long-term perspective, while lessening risk by investing in securities matching your investment persona and financial goals. 

Reasons to Invest in the Best Mutual Funds for Retirement 

You don’t really have any excuses not to invest in at least one mutual fund for your retirement benefits. As an individual and an investor, retirement planning should be uppermost in your mind. Therefore, the key reason to invest in some of the best mutual funds is to have a corpus collected by the time you retire. The best mutual funds for retirement are those that give you maximal returns over long periods. Retirement is a phase in life that eventually comes for everyone and financial planning is the need of the hour at a time when a regular source of income is not present. The best mutual funds for retirement target your requirements during retirement, ensuring financial security. 


There are several retirement plans on the market today. Among the best of these are the best mutual funds for retirement. Some may invest in more risky securities than others, but there will always be a plan to suit every investor type and need.


  1. When should I start investing for retirement?

Ideally, you should start investing small portions of your wealth in the best mutual funds for retirement when you start earning a regular income. This way, you can collect a corpus over time.

  1. Which is the best mutual fund for retirement?

Among the best mutual funds for retirement, you get a large choice in the market, and depending on your own time schedule and needs, you can pick any large-cap mutual fund, or even a multi-cap fund. 

  1. Why should I collect a large corpus for retirement?

The idea behind suitable financial planning is to accumulate a large corpus for your retirement. You will have no regular income source post retirement, and you need to have your finances in order, to meet daily living expenses plus any emergency costs. 

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