Retire Smartly: Plan Early Retirement by Investing in Mutual Funds

By on January 28, 2019
Retire Ssmartly

There is no rule that one has to work every day until the age of 65. You can always take the option of retiring early to explore your passions. Whether it is painting, gardening, spending more time with your family and friends or globetrotting with your spouse; you can do it all in the prime of your life. Here’s how you can make it possible.

How to save for early retirement

Retiring at 45 once seemed like a distant dream, but it is possible if you invest in mutual funds. Assuming you are a 25-year-old professional with a monthly salary of Rs. 40,000. You can kick start your investment journey with a monthly investment of Rs. 12,000 in diversified equity funds. And as your wages rise, you can consider increasing your investments by 10% each year. This allows you to increase the scope of your financial returns.

At the end of 20 years, you would have invested around Rs. 92 lakh thus earning a corpus of Rs. 3.15 crore (assuming a constant return of 14%). This is possible through the power of compounding. When you invest regularly in mutual funds, even your gains start to earn profits for you. This can quicken your investment potential and allow you to retire at the age you want.

Investment options at retirement

Your investment journey does not end with retirement. You may have stopped working but your money can continue to grow, thus aiding to maintain your lifestyle and achieve your financial goals.

Let’s consider a prudent diversification strategy that can help you earn fixed income during retirement. Here’s a cue from the income ladder approach — Once you retire, identify your monthly expenses based on your standard of living and inflation. Based on this value, you can transfer a portion of your corpus to debt mutual funds and withdraw a specific amount from it each month to meet your expenses. You can also invest in dividend mutual funds to earn a steady and reliable income. You can maintain the rest in equities to continue making high returns.

Alternate avenues

Investing in equities is an excellent way to receive high yields over time. However, with age, you may want to limit your exposure to equities. Diversifying into other avenues can minimise your risks. Here are a couple of options you can consider:

Senior Citizens’ Saving Scheme (SCSS)

The SCSS is a popular investment choice for senior citizens. It is also an excellent option to consider if you have retired early. This scheme offers investors with regular income and tax-saving options. More importantly, it is a safe mode of investment. The SCSS comes with a tenure of five years that can be renewed for another three years after the scheme’s maturity. You can open an individual account or jointly (with your spouse) and invest up to a maximum of Rs. 15 lakh in the SCSS. Currently, the scheme offers an interest rate of 8.4% per annum.

Post Office Monthly Income Scheme (POMIS)

If you are looking for a low-risk investment avenue, unrelated to the stock market that offers substantial returns, you may want to look at the POMIS. This is a monthly investment scheme provided by the Indian Postal Service. It is a five-year investment scheme that allows a maximum investment of Rs 4.5 lakh per person. But under joint ownership, you can invest up to Rs 9 lakh.

The POMIS promises a regular monthly income to investors at a fixed rate of interest. Presently, the interest rate is 7.5% per annum.

The scheme is ideal for retired people due to many factors:

  • It offers regular income at low risk
  • Minimal documentation required
  • Direct transfer of interest to your bank account without having to visit the post office each month


Early retirement is no longer a fad. Many people are implementing smart investment strategies to live life on their terms. So, whether you wish to retire at 45, 50 or 55, you may want to apply a sound investment plan to take care of your expenses. Once this is taken care of, you can enjoy your retirement to the fullest.


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