Retirement is an important stage of everyone’s life. After all your hard work, the victory lap needs to be applauded. And the victory lap is your retirement plan.
But for any retired person making the best use of retired money is a very important step to do, that would help keep the tax liability at bay. Whether self-employed or salaried, everybody expects to secure their lives after retirement.
So, choosing the best investment option is one of the necessities that can generate regular income as returns.
India provides various lucrative investment options for securing money for retired people in today’s time. These investments are very simple and efficient.
However, many retirees often face difficulties building a retirement portfolio with a mix of fixed income and investments. So, to fully understand this, look at the investment options below and choose the right one for you.
Senior citizen saving scheme (SCSS)
Retirees often look for investments that offer them the highest safety and regular income. So, this scheme can be the first choice of any retired person. As the name goes, it is available only for senior citizens or early retirees.
The government of India has offered SCSS since August 2004. It provides five-year tenure that can be further extended by three years after the scheme matures.
Currently, the interest rate in this scheme is 8.6 percent per annum, payable quarterly and fully taxable. Once invested, the interest rate remains fixed for the entire tenure.
The maximum investment amount is fifteen lakhs whereas the minimum is thousand rupees. This scheme offers zero risk on your investment and also allows premature withdrawals.
Post Office Monthly Income Scheme (POMIS)
This investment option gives you a fixed monthly interest in your investment and comes under the purview of the Finance Ministry. In POMIS, all the citizens can invest, starting from the age of ten.
And you are required to invest for five years because it is a five-year investment plan with a maximum amount of nine lakh under a joint account and 4.5 lakh under single ownership, while the minimum amount starts with fifteen thousand rupees. The interest rate changes quarterly, which is currently 7.8 percent per annum, payable monthly.
In case of any need, if you want to withdraw the money, you can apply for a fund withdrawal, but you need to complete at least one year of your investment; otherwise, there is a penalty.
There is another way where you can secure money for your retirement while doing the job. You can do it just by filling out form 10c in EPFO. An employee’s pension fund is where an individual can contribute during the service period so that after retirement, he or she can obtain money from that.
Bank fixed deposits (FDs)
It is another popular choice for any retired person Where you can save your money and get a return. The ease of operation in this scheme makes it a reliable avenue.
However, the interest rate has been falling over the last few years and is currently set at around 7.25 percent per annum. The scheme tenure ranges from one to ten years, and seniors can get an extra percent per annum, depending on the bank.
A senior can get 7. 75 percent on deposits with a longer-term. When your FD matures, you can renew it if your regular income need is met.
Although if someone is looking to save on tax, then the five-year tax-saving bank FD could be a better option to go for. But such a deposit will have a lock-in of five years, so you cannot withdraw your money before this period.
Mutual Funds
After your retirement, investing in mutual funds is the perfect decision you can make to build wealth over time. Multiple investors invest in various asset classes like Equity and Debt.
The debt portion provides you with the safety of your capital and a stable return. Moreover, mutual fund returns can potentially beat the inflation of return money more than other fixed-income investment schemes. Different types of mutual funds have different types of assets and offer different levels of returns.
The returns are market-linked; therefore, mutual fund returns are never fixed. However, you can invest in debt mutual funds or hybrid mutual funds with little or no equity exposure.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The Pradhan Mantri Vaya Vandana Yojana scheme comes under the life insurance corporation. It is a low-risk investment pension plan for seniors with ten years of tenure. Since last year the interest rate in this scheme has been 7.4 percent.
Only senior citizens above sixty years can invest in it, and the minimum amount that you have to invest is 1.5 lakh. But remember, investment in this scheme will not be eligible for tax deductions under section 80C.
Annuities
Annuities fall into two sections: immediate and fixed. Retirees can consider the immediate annuity schemes of life insurance companies where the annuity is currently around five to six percent per annum and is entirely taxable.
The corpus that is used to purchase an annuity is non-returnable, and you can get eight to ten different pension options. The immediate annuity may not be suitable for an investor who is capable of selecting and building his own portfolio.
Moreover, fixed and variable rate annuities offer a guaranteed rate of return through a fixed series of payments. These annuities tie their return to the performance of certain underlying investments such as mutual funds.
Selecting a reliable investment plan is very necessary. And you can do that only by proper research and thorough analysis. And not only that, but it is also important to keep a close track of the income from your investments.
That is why having a friendly and transparent relationship with your chosen financial company becomes paramount after the retirement. There are plenty of finance companies available in the market. All you need to do is to look for the best one!