Saving or investing for the purpose of retirement should start right from the time one starts working. With a wide array of choices for retirement investment products, it often gets difficult for us to identify the best one. However, this shouldn’t be a restricting factor. It’s not just about investing in the right product, it is also about saving enough for your golden days.

But one need not worry if they haven’t started that early in life. Different age groups see life differently. People in their 20s are more inclined to spend or save for short-term goals rather than long-term ones. In 30s people tend to be busy with loan repayments and kids. It’s in their 40s that people start investing/saving for the purpose of their retirement. Even though they have 15 odd years in their hand until retirement, most of their savings have to be channelized towards their retirement. But it’s never too late to start investing for retirement. I agree that starting early has its own benefits but better late than never right?

Here’s a guide for people of different age groups that they can refer to for saving and investing.

In the 20s

If starting in the 20s investing or saving 5% of one’s salary towards retirement is enough. They can gradually increase it to 10% in their 30’s. This is because the investment horizon is around 30 plus years and compounding will do its magic in the long term. The success of compounding lies not with starting early but sticking to it till the age of 60. It doesn’t matter if one starts investing at the age of 20 if he discontinues the investment early. In the 20s one has to look at investing more in equity than in any other asset class. Close to 90% of the investments can be in equity.

In the 30s

If starting in the 30s investing or saving 10% of one’s salary towards retirement is enough and slowly this can be increased to 40-50%. This is the age where the financial responsibilities will be at its peak with loan repayments, EMIs, and kids. So investing 10% is sufficient for now. Later the investments can be increased. Equities still should be a major part of the investment (close to 80%). Debt, gold and any other asset can take up the leftover part.

In the 40s

It’s not too late to start in the 40s. Saving 15% of one’s salary towards retirement is sufficient and this can be increased gradually later. Investing close to 70% in equities is suggested for people in their 40s. Debt can be close to 20-25% of the portfolio.

In the 50s

If you are starting in your 50s then 20% of your salary should be invested towards retirement. You will still have 10 years until retirement and this saving will be enough for reasonable living standards. Try increasing the investments at a faster pace as during this age you will have less financial responsibilities. The kids will be done with college and they will start working too so you will have fewer expenses. Hence you can start saving more. Investing close to 60-65% of assets in equity is suggested. Investment in debt securities will start increasing in your assets at a faster pace.

In the 60s

A handful of them will be having regular income from employment. It’s the time to relax and enjoy a life’s worth hard work and use the money you saved up. Liquidating all the investments at once is not suggested. Opting for monthly income plans or redeeming investments calculatedly so that you can meet your monthly expenses is something one should concentrate on. Investments can still be done with 30% assets in equity and 70% assets in debt.

Retirement Investment Products

There are 6 retirement investment products that are meant to generate your retirement fund or retirement corpus. These products have their own unique features, taxation, and maturity and lock-in periods.

Equity Mutual Funds

Mutual Funds are investment schemes professionally managed by financial experts. These investment schemes could invest in Shares/Stocks (Equity), Government and Corporate Bonds/Securities/Debentures (Fixed Income) or a mixture of the Equity and Fixed Income Securities. Mutual Funds are bought and sold in Units. Mutual Fund units are allocated to investors based on the proportion of their investments and value of these units is tracked as Net Asset Value (NAV) which is daily released by the Fund houses.

National Pension Scheme (NSC)

National Pension Scheme or NPS is a voluntary, retirement savings scheme run by the Government of India. The funds invested in these schemes by different investors are pooled together and invested in a diversified portfolio. This portfolio is managed by approved fund managers under pre-defined investment guidelines. The portfolio comprises of stocks, government bonds, treasury bills, corporate debentures, etc.

Public Provident Fund (PPF)

PPF is a small savings scheme offered by banks. Investments made in PPF have a lock-in of 15 years and give a fixed return according to the interest rate published by the Ministry of Finance every quarter. The interest rate on PPF stands at 8% p.a. Investment in PPF is tax-exempt subject to ₹5 lakh total exemptions across various 80(C) schemes. The interest earned on PPF is also tax-exempt.

Employees Provident Fund (EPF)

EPF is maintained and overseen by the Employees Provident Fund Organization of India (EPFO). This is a retirement benefit scheme for salaried employees. Around 12% of your basic salary is invested in this account. This monthly saving can be used when you are unable to earn or upon retirement.

Life Insurance Pension plans

Term insurance has almost become a necessity followed by medical insurance. But pension plans with insurance and investment option is not something that I would suggest. Instead, opt for term insurance and then invest the rest in equity markets either through mutual funds or shares to gain high returns. Pension plans and ULIPs that combine investments and insurance are no good. The two are best kept separate. These not only generate poor returns of 4–5% but also have long lock-in periods.

Atal Pension Yojana (APY)

APY is a deferred pension plan. To be eligible under this plan, one needs to be between 18 – 40 years of age with a savings bank account. Under this, there are 5 plans with guaranteed pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 and Rs 5,000. Returns are fixed at 8% and are assured. But unfortunately, there is an investment (and pension) cap for this. Do not depend solely on this source for your retirement income.