4 Best Ways To Use Your Retirement Accounts For Long-Term Investing

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How to Use Retirement Accounts for Long-Term Investing


You deserve to enjoy your retirement when you work hard all your life. But how can you ensure you have enough money to live comfortably and pursue your passions? The answer lies in the use of retirement accounts for long-term investing.

Long-term investing is putting your money into assets that can grow in value over time and provide you with income and security in the future. Long-term investing can help you achieve your retirement goals, whether you want to travel the world, start a new hobby, or leave a legacy for your loved ones.

In this article, you will learn how to make use of retirement accounts for long-term investing and how to apply it to your retirement planning. You will also discover some of the best long-term investment options for your retirement account and how to avoid common risks and challenges. By the end of this article, you will have a solid foundation of knowledge and skills to start your long-term investment journey for retirement.

Why is Retirement Planning so important?

Retirement planning entails more than just putting money aside for the future. It is also about imagining what your life will be like after you stop working. Retirement planning is essential because it allows you to align your actions with your goals. If you don’t choose suitable investment vehicles to withstand the impact of rising inflation, you’ll be left with nothing after inflation devours the majority of your corpus.

Knowing how to use retirement accounts for long-term investing empowers you set realistic and achievable goals that will make you happy and fulfilled. What makes it indispensable is that it helps you secure your future and live your dreams.

But the fact remains that only a small percentage of Indians know how to use retirement accounts for long-term investing. According to a survey conducted by PGIM India Mutual Fund and Nielsen, more than 51% of Indians polled had made no retirement plans at all.

Another Statista survey found that only 28% of Indian workers have a written retirement savings strategy. According to these statistics, while Indians are willing to fund their retirement accounts with extra money, they are less likely to do so by sacrificing current expenses. This may cause financial stress and anxiety later in life.

Learn the Use of Retirement Accounts for Long-Term Investing for your best retirement planning.

Retirement accounts are specialized investment accounts that allow you to save money for retirement. You can save taxes, preserve capital, and increase your returns over time if you know the use of retirement accounts for long-term investing.

Considering the use of retirement accounts for long-term investing discourages you from withdrawing your money too soon, either by imposing penalties for early withdrawals, restrictions, or a lock-in period. As a result, you will be more disciplined and focused on your long-term goals.

4 Best Long-Term Investment Options for Your Retirement Account

Now that we’ve established why retirement planning is so important, let’s dig deeper into the four long-term investment options to consider-

Equity-Linked Saving Scheme (ELSS)

ELSS is one of the trending use of retirement accounts for long-term investing. This is a type of mutual fund in which at least 80% of the assets are invested in equity and equity-related instruments. ELSS funds can provide higher returns than other fixed-income investments, but they also carry an additional degree of risk and volatility.

Key Information: ELSS
Interest Rate/Returns Returns are not fixed but depend on market conditions.
Tenure Min. 3 years
Min. and Max. investment Min: Rs.500/- Max: No upper cap
Risk High risk (as returns are market linked)
Premature Withdrawal Allowed only after 3 years (much lower than other tax-saving long-term schemes)
Tax Benefits -Upto Rs. 1.5 lacs of the investment under Sec 80C -Dividends and Capital Gains are tax-exempted.

Public Provident Fund (PPF)

One of the most tax-efficient options for the use of retirement accounts for long-term investing is PPF. This is a government-backed fixed-income scheme that provides tax-free returns.

Key Information: PPF
Interest Rate 7.1% p.a (for Q1 FY 23-24)
Tenure 15 years (can be extended for an additional 5 years with or without additional contributions)
Min. and Max. investment Min: Rs. 500/- p.a Max: Rs. 1.50 Lacs
Risk Guaranteed, risk-free returns
Tax Benefits Under Sec 80 C: Upto Rs. 1.50 lacs p.a Under Exempt-Exempt-Exempt category: Maturity Tax-free
Partial Withdrawal From the 7th year onwards
Interest Rate 7.1% p.a (for Q1 FY 23-24)

National Pension Scheme (NPS)

NPS is another catching on use of retirement accounts for long-term investing. This voluntary pension plan allows you to invest in a blend of equity and debt funds. Although NPS can help you widen your portfolio and generate market-linked returns, it has a more extended lock-in period and lower liquidity than other options.

Key Information: NPS Tier-I Tier-I
Interest Rate/Returns Asset Returns (5 yr) Asset Returns (5 Yr)
Equity 10.45%- 10.86% Equity 10.35%- 10.58%
Corporate Bonds 10.05%- 10.64% Corporate Bonds 9.86% - 10.60%
Govt. Bonds 9.57%- 10.05% Govt. Bonds 9.59% - 10.07%
Tenure NPS does not have a fixed tenure, but you can continue or defer your NPS account up to the age of 75 years.
Min. and Max. investment Min: Rs. 500- Rs. 1000 p.a Max: No upper limit Min. and Max. investment
Premature Withdrawal Withdrawals are restricted (only partial withdrawals are allowed before 60 yrs age) Premature Withdrawal
Risk High Risk (returns are market linked)
Tax Benefits Under section 80 C- Upto 1.5 Lacs Under Sec 80CCD (1B)- Additional tax benefit up to Rs. 50,000/- Tax Benefits

National Savings Certificate (NSC)

NSC is the next most frequently mentioned use of retirement accounts for long-term investing. This is a government-backed fixed-income scheme that offers guaranteed returns.

Key Information: NSC
Interest Rate 7.7% p.a (compounded annually)
Tenure 5 years
Risk No risk, guaranteed returns
Min. and Max. investment Min: Rs. 1000/- (thereafter in multiples of Rs.100/-) Max: No upper limit
PPrematureWithdrawal Not Permitted
Tax Benefits Upto Rs. 1.5 lacs under Sec 80 C

Avoiding Common Risks and Challenges of Long-Term Investing for Retirement

Long-term investing for retirement can be rewarding but also risky. You need to balance your potential returns with the possibility of losing money due to market volatility, inflation, taxes, and other factors. To avoid common risks and challenges of long-term investing for retirement, you should follow some basic principles:

Portfolio Diversification

Diversify your portfolio across different asset classes, such as stocks, bonds, cash, and real estate. This way, you can reduce the impact of a single market downturn on your overall wealth.

Focus on Asset Conservation

Invest in low-risk and less volatile investments that provide steady returns, such as fixed-interest Bonds, ETFs, Index Funds, liquid mutual funds, Post-Office Monthly Interest Schemes (POMIS), and annuities. These can help you preserve your capital and generate recurring income for your living expenses.

Invest in Tax-Advantaged Schemes

Take advantage of tax-saving retirement accounts, such as Public Provident Fund, tax-saving mutual funds, and National Savings Certificate (NSC). These can help you save more for retirement and defer taxes on your earnings until you withdraw them.

Portfolio Re-balancing

Keep an eye on your portfolio and adjust it whenever necessary. Adjust your asset allocation according to your age and risk tolerance. As you get closer to retirement, you may want to shift more of your portfolio to less risky investments that can protect your principal and provide a reliable income stream.

Control Your Emotional Impulses

Long-term investing requires patience, discipline, and a clear vision of your financial goals. But sometimes, emotions can cloud your judgment and make you do things that hurt your returns, such as panic selling, impulse buying, following fads, or overreacting to some market news.

Key Takeaways

Long-term investing is an innovative and effective way to use your retirement account to grow wealth and achieve financial goals. By investing for the long term, you can benefit from compound interest, diversification, tax advantages, and more. You can also choose from various investment options that suit your risk tolerance, time horizon, and preferences.

However, long-term investing also comes with its own sweet and sour challenges and risks that you must be aware of and avoid. You must have a clear plan, a realistic budget, and a disciplined mindset.

You also need to monitor and adjust your strategy as your situation changes. By following the tips and advice on how to use retirement accounts for long-term investing, you can turn your retirement account into a powerful tool o reach your financial dreams. Don’t wait any longer. Start your long-term investment journey for retirement today.


How much do I need to save for my retirement planning?

This question has no one-size-fits-all answer because it depends on various factors, such as your current income, expenses, lifestyle, life expectancy, inflation, and expected returns. However, some general guidelines to make the best use of Retirement Accounts for Long-Term Investing-
●  Save at least 10% to 15% of your annual income for retirement
●  Use the 4% rule to calculate how much money you can withdraw from your savings each year without running out. According to the 4% rule, you can withdraw 4% of your invested value in the first year of retirement and then adjust the amount for inflation in the next years.

When should I start thinking about retirement planning?

Retirement planning has no age limit. Start anytime you want. However, the earlier you begin, the better. Starting early allows you to benefit from the power of compounding, which means earning interest on your interest. It can also encourage you to save more and invest more aggressively because you will have more time to recover from market slumps.

Read more:  How Long-term investing helps create life-changing wealth – TOI

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