The early bird not only catches the worm, but also makes the perfect retirement plan. Spare a thought for your sunset years when your ability to earn declines and your skillsets are no longer in demand. Saving and investing for retirement should be a top priority for everyone, as the earlier you start investing for retirement, the more returns you can generate on your investment. One tried and tested method for retirement investing is putting money regularly in retirement mutual funds. Retirement mutual funds are specialty schemes that come with restrictions such as lock-in period.
In this blog post, we present the best mutual funds for retirement based on three-year returns. You can go through the funds and decide which one is best suited for your retirement investment needs.
Why choose retirement mutual funds?
Retirement funds are specialized investment vehicles designed to help individuals accumulate savings for their retirement years. Some of their unique features are lock-in period, goal-oriented investing, and a long-term investment outlook. You can opt for a lumpsum investment or start an SIP to invest in a retirement mutual fund.
A retirement mutual fund scheme being a solution-oriented scheme will have a lock-in period of five years or retirement, whichever is earlier. Simply put, investors in retirement mutual fund plans will not be able to liquidate their investments for five years or till retirement.
The lock-in period has both pros and cons. While it ensures that your retirement savings are not liquidated, it can be a hassle in case of emergencies when you would require those funds. Therefore, it is advisable to have a good emergency fund and invest only the retirement portion of your savings in retirement mutual funds.
Retirement mutual funds can also have age-based investment plans such as the 30s plan, the 40s plan, and the 50s plan. The asset allocation will become less aggressive as the age advances, giving investors some control over the asset allocation decision.
As an individual, you can choose retirement mutual funds to develop retirement investment discipline and avoid unnecessary liquidation. If you are a disciplined investor, you can also implement a systematic transfer plan to a retirement fund as you advance in age. This method will help you hold your savings in a liquid fund at a young age and safeguard your investments in a retirement fund as you grow old.
Here is a list of the best mutual funds for retirement based on their three-year returns.
List of best retirement funds in India for 2025 (as per 3Y returns)
Retirement mutual funds are solution-oriented schemes. This means that while the funds are managed by professionals, retirement schemes have a five-year or retirement lock-in period and the asset allocation might also differ from other schemes. Here are the top five best mutual funds for retirement based on three-year returns.
| No | Fund Name | Fund Size (in Rs. Cr) | Expense Ratio | 3-year CAGR |
| 1 | ICICI Pru Retirement Fund – Pure Equity – Dir Growth | 1,017 | 0.73% | 22.39% |
| 2 | HDFC Retirement Savings Fund – Equity – Dir Growth | 5,970 | 0.71% | 22.22% |
| 3 | ICICI Pru Retirement Fund – Hybrid AP – Dir Growth | 691 | 0.83% | 19.61% |
| 4 | Nippon India Retirement Fund-WC – Dir Growth | 3,288 | 0.98% | 19.49% |
| 5 | SBI Retirement Benefit Fund-AP -Dir Growth | 2,715 | 0.82% | 18.04% |
Data as of 2 December, 2024
Overview of the best mutual funds for retirement planning (as per 3Y Returns)
1. ICICI Pru Retirement Fund – Pure Equity – Dir Growth
This is a low-risk fund mandated to generate long-term capital appreciation and income for investors. The scheme predominantly invests in equity and equity-related securities. The fund also gives you the benefit of diversification.
2. HDFC Retirement Savings Fund – Equity – Dir Growth
The main objective of this solution-oriented retirement scheme is to generate a corpus to provide for pension to the investor after the age of 60 years. The corpus is invested in a mix of equity, equity-related instruments and/or debt/money market instruments.
3. ICICI Pru Retirement Fund – Hybrid AP – Dir Growth
This is an open-ended hybrid scheme that primarily invests in equity and equity-related securities to generate capital appreciation. The scheme may also invest in debt, gold/gold ETF/units of REITs & InvITs, and such other asset classes as may be permitted from time to time for income generation/wealth creation. This is a low-risk plan.
4. Nippon India Retirement Fund-WC – Dir Growth
The low-risk retirement scheme aims to provide capital appreciation and consistent income to investors in line with their retirement goals by investing in a mix of securities comprising equity, equity-related instruments, and fixed-income securities.
5. SBI Retirement Benefit Fund-AP -Dir Growth
The fund’s objective is to provide a comprehensive retirement saving solution that serves the varying needs of investors through long-term diversified investments in major asset classes. The scheme seeks to achieve this objective while keeping the risk level low.
Factors to consider before investing in retirement funds in 2025
Retirement mutual funds are solution-oriented schemes that come with a lock-in period. Here are some of the factors that you should consider before investing in a retirement mutual fund.
Define your retirement goals
The primary investment objective here is to invest for retirement. Therefore, it is important to clearly define your retirement goals, including your desired retirement age, lifestyle expectations, and income needs during retirement. This will help determine how much you need to save and the types of investments that align with those goals.
Liquidity
Assess your need for liquidity before investing in retirement funds. Retirement funds typically have a five-year lock-in period. Understanding this is important if you think you might need access to your funds before retirement.
Past performance
Review the historical performance of retirement funds to assess their consistency and reliability in different market conditions. While past performance does not guarantee future returns, it can provide insights into the fund’s management effectiveness.
Time horizon
Your time till retirement significantly influences your investment strategy. A longer time horizon allows for more aggressive investments, while a shorter one typically necessitates a conservative approach to protect your capital. You can opt for an aggressive or hybrid plan based on your time horizon.
Consider your risk tolerance
Most retirement funds will have low risk, but understanding your risk appetite is crucial. If you are young and have a longer investment horizon, you may opt for higher-risk options like equity funds. Conversely, if you are closer to retirement, lower-risk investments such as debt funds may be more appropriate.
You should consider the pointers discussed above before investing in a retirement mutual fund.
Conclusion
Retirement is a certainty in life. The goal is to have a financially comfortable retirement and this is possible if you plan, save, and invest for your retirement years well in advance. This will help you benefit from the time in the market and the magic of compounding. Retirement mutual funds are a great way to start your retirement investment journey as they help develop investing discipline and avoid liquidation because of the lock-in period.
