When young, retirement might appear a distant goal to fret about. However, if you want to live a dignified and comfortable retired life, retirement planning is important. To enjoy a carefree and relaxed retired life, you need adequate money and to accumulate an adequate retirement corpus, you must begin with your retirement planning as early as possible. Discussed here are some reasons to begin with your retirement planning early in life and how ELSS can help you with it.

Why is planning for retirement important and why invest in ELSS?

Growing old is a costly affair. While frivolous expenditures may lower, healthcare bills are likely to increase. In fact, if you add to this inflation, then your monthly mandatory expenses incurred on purchasing goods and services would rise too by the time you reach retirement.

While there are many ways of investing for your retirement like parking investible in pension schemes and conventional plans, one way can be by allocating funds periodically to an ELSS (equity-linked savings scheme) through SIP (systematic investment plan) for the next few decades. In this way, you not just save on the taxes, but even form a corpus that will pay for your requirements in the sunset years.

Note that the ELSS fund qualifies for tax benefits as per Section 80 C for up to Rs 1.50 lakh. Owing to its inherent potential of generating long-term wealth, the ELSS fund is recommended as the most suitable financial instrument amongst investors for tax-saving.

Mentioned here are two reasons to invest in ELSS to build your retirement corpus –

Systematic tax planning in ELSS via SIP (systematic investment plan)

Same as any mutual fund scheme, you as an investor can register for an SIP to invest in ELSS. Doing so helps you make constant investments towards your tax planning. After all, it’s way simpler for you to invest an amount of Rs 12,500 per month through SIP in ELSS than investing Rs 75,000 per month in the last two months of a financial year or a lumpsum amount of Rs 1.50 lakh in a year.   

Taxation gains from ELSS

As you require you to remain invested for at least three years, the capital gains from ELSS will be taxed as long-term gains. As per the existing tax laws, long-term gains of over Rs 1 lakh in a year on ELSS investments are taxed at 10 per cent. However, if your long-term gains are up to Rs 1 lakh in a year, then no tax is incurred.

Ending note

With ELSS, you may not just save tax under Section 80 C but even attain your retirement goal to build an adequate retirement corpus. You can club your tax planning and retirement goal by systematically investing in ELSS funds through SIP. However, if you are facing any difficulty in computing the monthly contribution you must invest to attain a retirement goal corpus, then you can take the help of an online SIP calculator.

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