Retirement planning often takes a back seat for small business owners while managing their dayto-day business operations

Retirement planning: Four investment options for small business owners to build a retirement corpus

Retirement planning often takes a back seat for small business owners while managing their dayto-day business operations. Unlike the salaried employees, who may have access to retiral benefits, such as the Employees’ Provident Fund (EPF), provided by employers, small business owners must actively plan retirement on their own. Several options, including the National Pension System (NPS), offer effective ways to build a retirement corpus.

National Pension System
The NPS is a good longterm retirement solution. Managed by the PFRDA, it allows flexible contributions based on one’s financial situation. It also offers tax benefits under Section 80C and an additional Rs.50,000 relief under Section 80CCD(1b). Investments are in a mix of equity, debt and government securities, providing market-linked returns for potential long-term growth.

Public Provident Fund
This is a safe, long-term savings option, offering guaranteed returns and tax benefits. With a 15-year lock-in period, the PPF ensures disciplined savings. The interest earned and maturity amount are also tax-free under Section 80C.

Mutual funds

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Mutual funds, particularly equity mutual funds, are another excellent tool for building a retirement corpus. Small business owners can systematically invest through systematic investment plans (SIPs). Over time, the compounding effect and potential for higher returns make mutual funds an ideal option for retirement planning.

Fixed deposits, bonds
For those seeking safety over growth, fixed deposits and government bonds can form a stable portion of a retirement portfolio. Though these options offer lower returns compared to equities, they provide capital protection and assured income.

Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

This story originally appeared on: India Times - Author:Faqs of Insurances