What are retirement mutual funds and should you invest in them for long-term wealth creation?

As you continue to pursue long-term wealth creation, it is vital to note that one of the key financial goals is ‘retirement planning’. While you spend some of your savings on a car, children’s education and a house, a small portion every month is supposed to be kept aside for life after retirement.

To save for retirement, investors tend to invest in a host of financial assets, which include, but are not limited to, NPS, PPF, FD and mutual funds.

Conservative investors tend to invest more in fixed deposits and PPF, whereas those with a higher risk appetite opt for higher exposure to equity through investments in NPS and mutual funds.

While each of these investment options is unique in its own way, one not-so-popular investment option is a ‘retirement mutual fund’.

What are retirement mutual funds?

These mutual funds fall under the solution-oriented mutual fund category. Overall, there are 29 schemes in this category with a total AUM of ₹32,835 crore as on 30 November 2025, according to AMFI data. The total number of folios registered with retirement funds stands at 30.37 lakh.

Some of the retirement mutual funds include UTI Retirement Fund, ICICI Prudential Retirement Fund (equity) and Axis Retirement Fund (dynamic).

(Source: AMFI; regular returns as on 30 Dec, 2025)

Advantages of investing in retirement mutual funds

I. Investing discipline: Retirement funds have a lock-in period of five years, which inculcates a sense of investing discipline among investors.

II. Diversification: Typically, most retail investors invest in a number of financial instruments to save money for their retirement. These include PPF, FDs, ULIPs and debt instruments. Investing in a mutual fund that allows you to save specifically for retirement is a step towards diversification.

III. Flexibility: Unlike other retirement plans, such as PPF and NPS, which have stricter rules with regard to withdrawal, retirement mutual funds are relatively more flexible. PPF has a 15-year lock-in period; NPS follows strict withdrawal rules, allowing only partial withdrawals after three years.

Additionally, most retirement funds offer a range of options, including conservative, moderate and aggressive. For instance, the Aditya Birla Sun Life Retirement Fund is available in the following options: the 30s plan, the 40s plan, the 50s plan and the 50s Plus plan.

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