Retirement planning is crucial to spend the golden years of your life without any financial worries. It's best to start investing early while you're working. This can help maximise your savings over the years. To have a better idea of how much you need to save over time, you can use a retirement calculator. Once you know an estimated figure of the required savings, use these 3 effective retirement planning tips. Here's a look.

1.     Consider Government Small Savings Schemes

These are a set of savings avenues that the Central Government manages. The purpose of these savings schemes is to encourage people to save regularly, regardless of their age.

However, the interest rates of these schemes have reduced considerably over the last 20 years. Also, the rates have been kept unchanged for the first quarter of FY23. As the economy grows, the money supply will go up and therefore, interest rates can fall further.

You usually need to save more to generate enough income to meet all kinds of post-retirement expenses. Consider these factors before investing in these savings schemes.

2.     Consider PPFs, FDs and Real Estate Investment

The National Savings Institute under the Ministry of Finance introduced the Public Provident Fund (PPF) in 1968. PPFs aim to mobilise small savings by offering returns on investment along with tax benefits. Banks and NBFCs offer fixed deposits where you can invest a sum for a fixed tenure and earn returns at a specific interest rate.

However, PPFs usually offer average returns and the returns from FDs are determined by a predecided interest rate. On the other hand, investment in real estate is hard to convert to cash quickly. You need to wait for a good buyer and go through long documentation processes before getting the money. Consider these factors before investing in real estate, FDs or PPFs.

3.     Consider Mutual Funds to Invest In

After using the retirement calculator to know the estimated amount you need to save, consider investing it in mutual funds in India. If you start early and can take more risk, you can invest in equities. Else try to balance the risk of equities with low-risk debt funds by investing in hybrid instruments.

Otherwise, you can invest in retirement/pension funds. These mutual funds offer a steady source of income after your retirement and you can receive an annuity on your investment until death. The returns generated are contributed as the interest on your fund pool. So, you can get a fixed benefit unaffected by market conditions and asset returns.

Retirement funds usually invest in low-risk avenues like government securities for regular returns. Moreover, the interest offered may be up to 12% as per the investment and policy. Therefore, pension funds can be great for retirement planning.

Remember that mutual funds offer more liquidity than other financial instruments. Also, you can enjoy better post-tax returns. By exposing you to different asset classes, they can help you earn superior returns. Keeping this in mind, start your retirement planning after using a retirement calculator to guide you.