Where to invest a lump sum for retirement? | Value Research Here we explore the investment options available for you to invest a lump sum amount for retirement
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Where to invest a lump sum for retirement?

Here we explore the investment options available for you to invest a lump sum amount for retirement

Let's consider a scenario where you have received a certain amount as proceeds from a sale of land. The amount is handsome, say Rs 10 lakh and you want to save it for your retirement which is around 15 years away. So among the options - ELSS, NPS or flexi-cap funds, let's see how you can invest it for the long-term.

If you are seeking a tax benefit and want to claim a deduction under section 80C of the income tax act, you should go for ELSS funds. But remember, the deduction will be limited only to the maximum ceiling of Rs 1.5 lakh. Probably, you can limit your investment in ELSS funds only to Rs 1.5 lakh if you need the tax benefit.

You may also claim an additional deduction of up to Rs 50,000 by investing in an NPS Tier I account. This is available over and above the deduction under section 80C. NPS is a wonderful investment avenue to help accumulate a retirement corpus, especially for those who lack discipline. Barring certain specified situations, NPS doesn't allow withdrawing the money before the age of 60. Even at the age of 60, the investor is required to utilise at least 40 per cent of the corpus for buying an annuity plan. The rest can be withdrawn as a tax-free lump sum.

Though many investors look at this restriction on withdrawals as a disadvantage, it is beneficial for someone who lacks the discipline and is likely to dig-in his retirement savings every now and then. It safeguards your golden years by virtually locking the money meant for your retirement till the age of 60. But if you are far away from retiring, ensure that you allocate the maximum possible portion to equities. NPS allows allocating up to 75 per cent in equities through 'Active Choice' till the age of 50.

If you are a disciplined investor and not seeking a tax benefit, flexi-cap funds would be the ideal choice. Flexi-cap funds have the leeway to invest across different sizes of companies and do not have any restrictions in terms of lock-in period.Get the specific names of investment-worthy funds across categories.

You can also check out Value Research Portfolio Planner to get a list of funds tailor-made for your financial goals and needs.

However, more than choosing among an ELSS, NPS, and a flexi-cap fund, it is important for you to spread the investment over a period of 12 to 18 months. It is important money. Follow a conservative approach and do not invest it in one go. By spreading the investment, you will average the cost of purchase and reduce the risk of investing all your money at a market high.


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