Delhi: Thinking about retirement usually is the last thing in the mind of a young investor. When it comes to retirement planning, procrastination is the norm, as it is fairly easy to write-off its importance as something that can be thought about later in the future. The young investor has tax-saving in his mind instead, and understandably so. Tax is a significant expenditure that can consume a large portion of income.

Irrespective of how distant in the future retirement may be, the importance of retirement planning cannot be understated in today’s times. With the advancement in medical sciences, our life expectancy is on the rise, which inevitably translates to a longer retirement life. Medical costs are increasing continuously, and the penetration of retirement benefits and the overall social security infrastructure is relatively weak in India. All of this, along with the need to safeguard for inflation and maintain (and even improve) our standards of living post-retirement, the importance of building a sufficiently large retirement corpus should not be belittled. Procrastination can be costly too – a delay of 10 years in investing for your retirement corpus can reduce your total retirement corpus by more than 50%, even though the total amount invested is the same overtime. The earlier we start, the more our money works for us.

Therefore, why not strive to achieve both tax planning and retirement planning objectives at the same time? HDFC Retirement Savings Fund (‘the Fund’) is one such mutual fund that can help young investors hit these two targets with the same arrow. It is a notified pension scheme under section 80C of the Income Tax Act, 1961. Investing in the Fund can offer a deduction of up to Rs. 1,50,000 from our taxable incomes. For an investor in the highest tax bracket, this translates to tax savings worth Rs. 46,800 every year (ignoring surcharges). Young investors can consider investing in the Fund and availing the twin benefits of saving tax and building a retirement corpus.

However, every individual is unique. Two investors need not have the same risk appetite, and hence should not have the same asset allocation in their portfolios. . HDFC Retirement Savings Fund (“the Fund”) is a pension scheme that offers investors 3 different plan options – the Equity Plan, the Hybrid Equity Plan, and the Hybrid Debt Plan. Equity Plan offers the highest exposure to equities, and Hybrid Debt Plan the lowest. Investors can, therefore, invest in a plan that better suits their risk-return profile and their stage of life.

The fund has a lock-in period of 5 years or until the age of 60 – whichever is earlier. This ensures long term investment discipline. When a specific portion of income gets locked-in and earmarked for our future, investors automatically rationalize their spending on other personal/social requirements. The Fund encourages long term holding of investments, which can be crucial in building a sizable corpus over time. Moreover, once the corpus is built, a systematic withdrawal plan (SWP) can be also used to ensure a steady stream of cash flow post retirement.

Overall, being a goal-based investment vehicle, HDFC Retirement Savings Fund helps us balance our current aspirations vis-à-vis our future requirement of leading a comfortable retirement life. Investing in the fund can therefore be the ideal way to save tax, and at the same time, retire in style.

An Individual/HUF is entitled to deduction from gross total income for investments in tax-saving pension schemes notified u/s 80C of up to Rs.1.5 Lakh (along with other prescribed investments) under Section 80C of the Income-tax Act, 1961. In view of the individual nature of the tax consequences, each investor is advised to consult his/her own professional tax adviser.

Investors should seek appropriate advice before taking a decision to invest in any securities. The information given is for general purposes only. Past performance may or may not be sustained in future. HDFC Mutual Fund/AMC is not guaranteeing any returns on investments made in the Scheme. The current investment strategies are subject to change depending on market conditions. The views / information provided do not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Investors should be aware that the fiscal rules/tax laws may change and there can be no guarantee that the current tax position may continue indefinitely. In view of individual nature of tax consequences each investor should seek appropriate advice.