Tata Retirement Savings Fund

Tata Mutual Fund

Life expectancy has increased in the last 50 years from 43 to close to 65 and it is expected to increase to over 75 years by 2050. With the increase in life expectancy, the number of post-retirement years without regular income will also increase consequently. It, therefore, becomes critical now more than ever to ensure regular income for life after retirement. Hence, one must keep the retirement planning in line with life expectancy and inflation to meet expenses in the golden years of life.


When an individual imagines retirement, what does he foresee? Living a life of relaxation, travel, and ultimately reap the benefits of decades of hard work? Or an anxious time, when meeting the costs of daily living is a challenge? Everyone will opt for the first option.


In this note, we will discuss the key points of Retirement investments. So, let’s discuss the important steps of planning for the retirement that everyone dreams of.


Step 1: – Set Retirement Goals:

List down your retirement goals and try to break them into two parts. The first will be the basic needs which can pay kitchen and medical bills. And the second one is for the soul like travel, pursue hobbies, etc.


Step 2: – Quantify Post Retirement Expenses:

The two main reasons why the majority of investors fall short of funds in their retirement. One, miscalculation of the cost of living at the time of retirement and this happens because generally, investors forget the demon of expenses- inflation. For instance, if today’s cost of living of a 40-year-old person is Rs. 30,000 then at the time of retirement at the age of 60, the cost of living will be Rs. 80,000 (assuming inflation rate of 5%).


And the second reason is that investors don’t pick the right asset class to reach the desired retirement corpus.


Step 2: – Start early:

Investors tend to keep retirement planning lower in the order of preferences while doing financial planning. For creating wealth, one needs to plan investments and start as early as possible, and stay invested for the long term.


Table 1: Longer the investment bigger the wealth

Age of Investment Investment Amount Rate of Return* Corpus Accumulated on retirement
25 1,00,000 12%* 52,79,961.96
30 1,00,000 12% 29,95,992.21
35 1,00,000 12% 17,00,006.44
40 1,00,000 12% 9,64,629.31
45 1,00,000 12% 5,47,356.58
50 1,00,000 12% 3,10,584.82


Table 2: Early planning = smaller investment amount

Age of Investment Investment Amount Rate of Return* Corpus Accumulated on retirement
25 7,65,584 12%* 5,00,00,000
30 13,90,834 12% 5,00,00,000
35 25,26,724 12% 5,00,00,000
40 45,90,292 12% 5,00,00,000
45 83,39,168 12% 5,00,00,000
50 1,51,49,739 12% 5,00,00,000


Retirement age considered at 60 yrs. The above example is for illustration purpose only, no guarantee of assured returns in the past and future of any of Tata Mutual Fund schemes.


*Assumed Rate of Return


Time is indeed the best Magic Potion in the Power of Compounding.


Table 1 explains the Power of Compounding; A lakh of rupees invested and staying invested for the long term will generate higher corpus value at the end of the tenure with the same rate of return. One lakh invested at the age of 50 will be able to accumulate only 3.10 lacs on the day of retirement. By investing a similar amount, a young investor will accumulate 17 times more than the 50-year-old investor


Table 2 explains the Power of Early Investment; to reach a 5 Crore corpus at the time of retirement one needs to invest a higher amount with every passing year. At the age of 25 one needs to invest Rs. 7.65 lac to achieve 5 Crore at the age of 60 (retirement age). For the same amount, a 40-year-old investor has to invest 6 times more to generate a retirement corpus of Rs 5 Crores.


Step 3: – Invest in the right asset class and investment product:


The asset class is like a weapon in Financial Planning. One should know the right one for the right battle. By considering age, risk appetite and retirement corpus one should know the right asset allocation suitable for investment. Like;

  1. National Pension Scheme (NPS)
    • While NPS does offer various asset allocation options to the subscribers it is struggling to find favor amongst investors due to the absence of flexibility to utilize the retirement corpus like compulsory buying of annuity plans. Further, the equity allocation is restricted according to the age of the investor.

         2. Insurance Policies (retirement plan)

    • Pension plans from insurance companies do provide the comfort of assured returns post-retirement however, the returns potential becomes limited due to a predominant exposure to debt which may fail to beat inflation over the long term.

         3. Retirement Savings

    • Here, the Retirement Savings Funds offered by mutual funds can fill the gap as it offers flexibility to withdraw retirement corpus. Mutual Fund based retirement schemes will go a long way to develop the pension market in India and offer choices to investors based on their investment preferences and risk profile. At Tata AMC we offer a retirement fund with the holistic view of product offering to meet the desired retirement planning option for all the investors as per their risk appetite.


Tata Retirement Savings Fund is a carefully structured suite of plans designed to meet investment needs for retirement planning at all the stage of investors.

  • Progressive Plan: Advisable for investors in the age group of 25 to 45 years. It has a high equity allocation from a long-term investment horizon.
  • Moderate Plan: Advisable for investors in the age group of 45 to 60 years. It has a blend of investments between equity and debt with a higher equity allocation.
  • Conservative Plan: Advisable for investors with a lower risk appetite. It has a higher Debt allocation compared to the Progressive and Moderate Plans.


Other benefits of Tata Retirement Savings Fund:

  • SIP facility: Investor can invest in the fund through the Systematic Investment option with a Minimum of Rs.150 per month. This gives the additional benefit of Rupee Cost Averaging and inculcates the habit of savings.
  • Lock-in facility: The fund has a lock-in of 5 years or the age of 60. Post the completion of 61 months, redemptions from the fund are free of exit load. This option helps the investor to stay invested for the long term.
  • Load Free switch out options: The fund gives the investor an option to change the plan during investment tenure. This gives flexibility to an investor to switch the plan up to six times during the tenure of the investment as and when he thinks it is time to make a change as per his risk appetite and retirement goal.
  • Auto Switch facility: Under this facility, the fund actively switches from one Plan to another on behalf of the investor as per the pre-defined age criteria. In this option, an investor doesn’t have to actively track the fund to switch the plan in every passing age bracket.
  • SWP option: Investors can opt for a Systematic Withdrawal Plan to meet the regular income flow from the investment. This option can help to generate a regular income during retirement years.


Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.


Happy Investing!!!


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