Discover the key metrics, risk factors, and performance indicators to choose the right mutual funds for long-term retirement planning.

Securing funds for retirement stands as a top financial objective for most people. Investors prefer mutual funds for retirement savings because these funds combine portfolio diversification with professional oversight and offer flexible investment options. The vast array of diversified retirement mutual fund options makes selecting the appropriate mutual funds an overwhelming task.  In this blog, let us explore some of the best mutual funds for retirement 2025.

Why Mutual Funds for Retirement?

Mutual funds collect capital from various investors and invest it in a diversified portfolio of stocks, fixed income or other securities. They may be a healthy option for retirement savings because of the following reasons:

• Proper Management: Through their investment decisions, fund managers allow one to save time and effort as they analyse market trends, adjust portfolios continuously which reduces the risks, and thereby identify opportunities with stable returns.
• Diversification: Mutual funds distribute investments among multiple assets which helps lower the potential for substantial losses. For example, large-cap equity funds invest in big and stable companies, while mid-cap and small-cap funds focus on medium and small companies with higher growth potential but moderate risk. Multi-cap funds spread investments across all three categories to balance risk and returns.
• Flexibility: Investors get an option for selecting funds matching their risk preferences along with their financial timelines and objectives.
• Accessibility: The simple process of buying and selling mutual funds makes them an ideal investment option for beginners as well as professionals.
• Tax Benefits: If an individual chooses the old tax regime, they can get a tax benefit of up to Rs.1.5 lakh under Section 80C which will help them save on taxes while growing their wealth.

Mutual funds for retirement

Key Factors to Consider When Choosing Mutual Funds for Retirement

Before moving on to the top retirement mutual funds 2025​ recommendations, it is important to understand the factors that influence the selection of mutual funds for retirement:

• Risk Tolerance: When one is close to retirement, they become more conservative. Funds having more allocation to debt securities due to lower risk can be more suitable for this type of situation.
• Time Horizon: If an individual is close to retirement, the time horizon is relatively short. They can use funds that focus on capital preservation and capital generation to protect their money from market fluctuations and avoid major losses, as they have little time to recover.
• Fees and Expenses: High fees are cost factors that can impact the returns in the long term. Selecting low-cost index funds or options that have low expense ratios may be a better option.
• Sharpe Ratio: It helps to measure risk-adjusted returns. A higher ratio shows good returns relative to risk. Suitable for retirees seeking stable, efficient performance.
• Portfolio Turnover Ratio: It indicates how frequently a fund buys or sells securities. Lower ratios mean lower costs and taxes, making them more suitable for long-term retirement investing. 
• Fund Managers Experience: Investors should check the fund manager’s experience in the factsheet before investing. It is important to review how many years of experience the manager has, their track record, and how well they have handled different market conditions in the past. A skilled fund manager with a strong history of managing investments can make better decisions, helping to maximize returns and reduce risks.
• Past performance: It is important to see how well a fund manager has handled investments before. While it does not guarantee future returns, it helps investors understand if the manager has made good decisions in different market conditions.

Top Mutual Funds for Retirement in 2025

Looking at the 5 year historical returns, the best tax-efficient mutual funds for retirement are:

1. ICICI Prudential Retirement Fund – Pure Equity Plan

• This fund has a Net Asset Value (NAV) of Rs. 28.45 as of 21 March 2025 and the Asset Under Management (AUM) was reported at Rs. 981 crore as of February 2025.
• The AMC has an expense ratio of 2.18% and a Sharpe ratio of 0.88 and the portfolio turnover ratio was reported at 45%
• Further, the top 5 holdings of the fund based on highest allocation as of February 2025 are:

2. HDFC Retirement Savings Fund – Equity Plan

• This fund’s NAV stands at Rs. 46.88 as of 21 March 2025. Further, the fund’s AUM is reported at Rs.5,571 crore as of February 2025.
• The fund’s expense ratio is 0.85% , with a Sharpe ratio of 0.97 and a portfolio turnover ratio of 16.05%.
• Further, the top 5 holdings of the fund based on highest allocation as of February 2025 are:

3. Nippon India Retirement Fund – Wealth Creation Scheme

• This fund has an NAV of Rs. 26.65 as of 21 March 2025. Whereas AUM has reached Rs. 2,849 crore in February 2025.
• The expense ratio of this fund was reported at 1.03%, with the Sharpe ratio at 0.67% and the portfolio turnover ratio at 49%.
• Further, the top 5 holdings of the fund based on highest allocation as of February 2025 are:

4. ICICI Prudential Retirement Fund – Hybrid Aggressive Plan

• The fund’s NAV was reported at Rs. 23.19 as of 21 March 2025, with the AUM reaching Rs.705 crore by February 2025 end.
• The fund’s expense ratio is 0.95% , with a Sharpe ratio of 0.86 and a portfolio turnover ratio of 44%.
• Further, the top 5 holdings of the fund based on highest allocation as of February 2025 are:

5.  HDFC Retirement Savings Fund – Hybrid- Equity Plan

• This fund has an NAV of Rs.36.29 as of 21 March 2025, and AUM reached Rs.1,485 crore as of February 2025.
• The expense ratio of the fund was reported at 0.96% with the Sharpe ratio at 0.70 .
• Further, the top 5 holdings of the fund based on highest allocation as of February 2025 are:

Mutual funds for retirement

Retirement funds aren’t the only mutual fund options available to investors. For instance, ELSS funds help save tax under Section 80C of the old regime and have a three-year lock-in period, making them good for long-term growth. Large-cap funds, which invest in stable and well-established companies, are considered safer and ideal for long-term goals like retirement, offering consistent returns over time. Today, various online platforms allow investors to research and compare mutual funds, helping them choose the best option based on their needs.

Risks to Consider

Although mutual funds can be a health option for retirement, there are still a few risks associated with them. Some of the key risks are as follows:

• Market Risk: The value of your investments may change due to market conditions.
• Interest Rate Risk: The price of bond funds may come down if interest rates rise.
• Inflation Risk: With time, inflation can erase the purchasing power of the savings.
• Liquidity Risk: Some funds may have withdrawal restrictions, making it difficult to access the capital when required.

Risk associated with mutual funds

Conclusion

Selecting the right mutual funds for retirement requires proper consideration of the individual’s financial goals, risk-taking ability, and period. For a safer side and long-term planning, individuals may consult a financial advisor to ensure that the investment strategy aligns with their retirement goals. With the correct approach, individuals can make a portfolio that provides stability at retirement.