Use ELSS as a First Step to Save for Retirement

  Author: Kundan Kishore

Many of us are aware of equity linked saving scheme (ELSS) offered by mutual funds not only help you save taxes but also make your money grow well thanks to the long term growth from equities. This growth in money can be harnessed to meet major future financial needs such as retirement. Here, we will briefly cover the basic steps you need to take in order to use ELSS investments to get started with your retirement investments. 

Invest in ELSS despite Provident Fund savings Early in people’s work life, typically a significant portion of investments are tax-saving investments like equity linked savings schemes (ELSS). It is always a smart move to earmark these investments for your major future needs like retirement. This is despite the fact you might also be accumulating provident fund savings. But those savings are unlikely to be enough to support you for the entire length of retirement. ELSS helps you save enough to supplement your provident fund savings.

For instance, if you invest Rs 10,000 per month in an ELSS for 30 years, and your money grows at 12 per cent per annum, you will accumulate Rs 3.05 crore. Clearly, ELSS investments can get you going a long way when it comes to saving for retirement even as you get to save taxes.

 Supplement ELSS investment with increase in income As your income increases over time, you can increase your investment amount in ELSS or invest in other equity funds performing consistently over one, three and five years. In this way, you can create a mutual fund portfolio for your retirement.