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evergreenclub991 · 2 years

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Promising Investments for Your Retirement Money

One of the stepping stones to a peaceful post-retirement life is investing your retirement money in stable and efficient options. This allows you to sustain the lifestyle you had while working. Before choosing your plan, it is vital to keep in mind factors like your initial capital and monthly living expenses. There are many options available in the market and picking one that suits you best can be tiresome. To learn more about safe ways to build your ideal investment portfolio, keep reading!

Prerequisites for investing after retirement:

Review your profile and identify the associated risks. Try to keep your profile as balanced as possible and be well-informed about the consequences.

Calculate how much you will need to pay for your bills and other monthly expenses. Plan your investments so that these expenses do not deplete your initial amount.

Better safe than sorry, have a clear understanding of the investments you are making. Analyse the risk and returns of each investment before committing to it.

Divide your investments, don’t pour all your funds into one type of investment, and avoid losing more than you can afford.

Have a reasonable amount of emergency funds that can act as a safety net in the case of a medical emergency or a bad investment.

So, you’ve gone through all the prerequisites, checked all the right boxes, and are now looking at a vast ocean of investment opportunities. Here are some of the most recommended investment plans for retirees that allow you to avoid tax liability and have a steady source of monthly income.

1. Senior Citizens’ Saving Scheme (SCSS):

As the name suggests, this scheme is only for citizens above the age of 60. It is one of the most popular choices among retirees as it provides an assured way to protect your initial capital. It offers the highest post taxable returns compared to other fixed-income taxable products, allows premature withdrawal, and is eligible for tax benefits.

With an upper investment limit of 15 lakhs, the freedom to open multiple accounts, a five-year tenure with an extension of three years, and a current interest rate of 8.6% per annum, SCSS is a post-retirement investment opportunity you don’t want to miss out on.

2. Fixed Deposits (FD) For Seniors:

One of the safest forms of investments as it is free from market variables and provides a fixed monthly or quarterly return based on your preference. Banks generally offer higher interest rates on FDs for senior citizens, that range anywhere between 5 to 9%.

The tenure period ranges from 12 months to 60 months; FD also offers higher liquidity and enables you to withdraw money whenever you require. Everything considered, an FD is a stable option and you should include it in your investment portfolio.

3. Post Office Monthly Income Scheme:

This unique investment opportunity for seniors offers considerable returns at an interest rate of 7.6% as per rates announced in Q2 2019. The maximum deposit allowed is 4.5 lakhs for single ownership and not more than nine lakhs for joint accounts.

Like Fixed Deposits, POMIS offers monthly returns that are not affected by market fluctuations and are taxable. Unlike a Fixed Deposit, POMIS has a fixed maturity period of 5 years. The best part? The monthly interest is directly credited to your savings account, so you can add it to your arsenal of investments.

4. Mutual funds:

“Mutual funds Sahi hai.” we’ve heard this statement one too many times. To retirees who are economically stable enough to invest in higher-risk alternatives, mutual funds are an exciting option. Investing in mutual funds can provide high returns but they are also highly volatile and are subject to market risks.

Identify the right risk profile for your current situation and allocate your funds accordingly. Retirees are urged to steer clear of thematic and funds including mid or small caps.

5. Debt funds:

A debt fund is a type of mutual fund but doesn’t have as much risk involved because they focus on fixed-income investments. They can provide returns as high as 15% of your investment per annum, are flexible, and provide liquidity, but charges may apply, and money cannot be withdrawn immediately. Nevertheless, long-term debt funds offer high returns based on market performance.

After retirement, the money you have worked tirelessly to save should work on its own to provide for your monthly expenses. Retirees are advised to construct an efficient investment portfolio that distributes their funds to several options by weighing the risk involved and meets their monthly financial requirements.

Make your savings work for you while you sit back and get a kick out of your retirement.

To avail more important information and attend the helpful sessions for seniors you can install Evergreen Club which is one of the best social networking apps for older adults.

Respond

#evergreenclub.in #senior social network

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sunshineweb · 4 years

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Best Investment Options for Senior citizens in 2020 to generate regular income

Due to the falling interest rate, the risk involved in equity, and debt space, many senior citizen investors are now in a huge problem to generate a decent return for their survival. What are the best investment options for senior citizens in 2020 to generate regular income?

Before jumping into available products, you have to first clear yourself with what are you looking for while investing.

# Is it for income generation or growth?

You have to be very clear whether the investment is for income generation for your regular survival or investing to grow your accumulated corpus.

# What is your tax slab?

You have to look for post-tax returns always rather than the pre-tax return. Because if you are falling under the highest tax bracket, then a major portion of return will be eaten by the tax.

Hence, understand the product at first, then your tax slab and after that take a concious decision.

# You can stagger your investment

If your idea is to generate a constant stream of income, then you can use a bucket strategy. Where you are putting your first 10-15 years requirement in safe products (a first bucket) and accordingly the future requirements splitting into a different bucket and taking the calculated risk slowly as the required term is higher.

If you can’t do that, then hire a fee-only financial planner to help you in this.

# Higher RISK always not HIGHER returns

Higher risk always does not mean higher returns. There is a probability of higher loss also. Hence, never heed anyone blindly. Understand the risk properly and then decide yourself.

# Inflaiton RISK

Never think or not be in the wrong assumption that if you have a sufficient amount today then that sufficiency will remain the same. Due to inflation, whatever may be a good income for you will not be sufficient for your requirement. Hence, always consider inflation while investing.

# Interest Rate Risk

The majority of products offers around 5-10 years. Hence, once the maturity is over, then it is not sure whether you will be able to generate the same returns or not. For example, if you opted the SCSS scheme, then it is 5 years product. Once the 5 years completed, then you have to face the interest risk. Because after 5 years, the same SCSS may not offering you the same interest rate as what you are getting today. Hence, understand this factor properly.

# Liquidity

Look for the product which offers you certain liquidity. Because we don’t know when you need money. Hence, it is always wise to choose a product wisely which offers the highest liquidity.

# Make a nomination and WILL

Wherever you invest, make sure you have nominated and if possible create a WILL also. So that your dependents or family may not be in a tussle in your absence.

Best Investment Options for Senior citizens in 2020 to generate regular income

In this post, I am concentrating only on SECURED products. I am not suggesting any market-linked debt or equity instruments. Because to invest in such products, you need someone’s guidance or you have to do your own research. Hence, rather than forcing you to experiment on any such options, in this post, I am sharing the best investment options for senior citizens in 2020 to generate regular income.

# Bank or Post Office FDs

I know that currently Bank FDs are offering you around 5% to 6.5% interest rates. However, recently few banks started to offer higher interest rates for senior citizens if they are booking the FDs for 5 years to 10 years. Refer my latest posts on that “SBI WeCare Deposit Vs Senior Citizens Savings Scheme (SCSS) – Which is the best?” and “HDFC Senior Citizen CARE FD Vs SBI WeCare FD Vs Senior Citizens Savings Scheme (SCSS) – Which is the best?“.

When I say Bank FDs, I am suggesting nationalized banks or big private sector banks like ICICI or HDFC. I am not suggesting any Co-Operative Banks.

You can explore the Post Office FDs also. The current interest rate is 5.5% to 6.7%, which is almost equal to the bank FD rates. You can refer to the latest interest rate at my post “Latest Post Office Interest Rates April-June 2020“.

You have an option to get the interest rates either on monthly/quarterly or at maturity. If you are really looking for the safety, then I suggest Post Office Term Deposits over the Bank FDs.

# Senior Citizen Savings Scheme

Post Office and certain recognized Banks offer you this wonderful product. The term is 5 years and the maximum amount you can invest is Rs.15 lakh. The current rate of interest is 7.4%. The interest will be payable on a quarterly basis.

You can refer to the complete details about the Senior Citizen Savings Scheme at “Post Office Senior Citizen Scheme (SCSS)-Benefits and Interest Rate“.

# Pradhan Mantri Vaya Vandana Yojana (PMVVY)

It is a wonderful product launched by the Government of India. It is a 10 years product. The current interest rate is 7.4%. This product is currently available up to 31st March 2023. You can buy this from LIC. In fact, you can avail of the loan on this. The maximum limit to invest is Rs.15,00,000.

You can refer to the complete details about Pradhan Mantri Vaya Vandana Yojana (PMVVY) at “Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know“.

# Post Office Monthly Income Scheme (POMIS)

As the name suggests, the Post Office will pay you the interest on a monthly basis. It is a 5 years product. The maximum limit is Rs.4.5 lakh. The current interest rate is 6.6%. Refer my article on this product “Post Office Monthly Income Scheme or MIS – A complete guide“.

# 7.75% Government of India Savings Bonds (Taxable)

It is a 7 years bond where the current interest is at 7.75%. There are options like cumulative and non cumulative also. The Bonds will bear interest at the rate of 7.75% per annum. Interest on non-cumulative Bonds will be payable at half-yearly intervals from the date of issue (The date of issue of the Bonds in the form of Bonds Ledger Account, will be opened (issued) from the date of tender of cash or the date of realization of draft/cheque.) or interest on cumulative Bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal.

You can refer my post for a complete detail at “How to buy/invest in 7.75% Government of India Savings Bonds?“.

# Tax Free Bonds

Currently there are no tax-free bonds offerings. However, you can buy them from the secondary market. You will get the tax free interest up to maturity. You will get various maturing tax-free bonds. You can refer my post for a complete detail at “Best Tax Free Bonds 2020 in India – Should you invest?“.

The yield may vary based on the date of maturity and coupon. Hence, you have to understand your requirement at first then jump into buying such bonds.

# Immediate Annuity Plans by Life Insurance companies

Life Insurance companies including LIC offer such immediate annuity plans. For example, you can check LIC’s Jeevan Shanti plan. This particular plan offers around 10 various options based on your requirement.

This product will give you GUARANTEED returns for the specified period based on the option you opt for. Hence, there is no question of interest rate risk.

Conclusion:-As per my knowledge, these are the Best Investment Options for Senior citizens in 2020 to generate regular income. As I pointed out earlier, I have not listed any debt funds or equity funds where you can invest and use the strategy called a systematic withdrawal plan. Because they are not suitable for those who are looking for a safe and constant stream of income.

Refer our latest posts:-

Best Investment Options for Senior citizens in 2020 to generate regular income

Pradhan Mantri Vaya Vandana Yojana (PMVVY) 2020 – 2023 – 5 Changes you must know

HDFC Senior Citizen CARE FD Vs SBI WeCare FD Vs Senior Citizens Savings Scheme (SCSS) – Which is the best?

Mutual Funds Inter-Scheme Transfer – Hybrid Funds are risky now?

SBI WeCare Deposit Vs Senior Citizens Savings Scheme (SCSS) – Which is the best?

Who is eligible for Pradhan Mantri Awas Yojana (PMAY) 2020 – 2021?

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personalfn-blog · 6 years

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7 Investment Avenues for Your Post-Retirement Portfolio

Shekhar, a computer engineer by profession, was planning to retire soon.

He had been setting aside all his monthly savings in bank FDs, and was having EPF and gratuity accounts too, which he thought would suffice to take care of his post-retirement needs.

But, as he was getting closer to his retirement, there were three questions on his mind that somehow disturbed him.

‘How long will I survive?’

‘Will my savings last long enough to support me during retirement?’

‘Will it sustain me till the end of my life and support my family after I’m gone?’

Walking home one evening, he was deeply engrossed with his thoughts on life post-retirement and meets his friend Rahul on his way.

Rahul, a financial planner, retired a year ago and is enjoying his retirement life.

So Shekhar decided to discuss his concerns with him.

Unfortunately, most of us begin to worry about our post-retirement life at the brink of retirement phase.

Rahul explained that when retirement begins, income stops, and expenses continue. The years from the start of retirement till demise are unpredictable, however financially preparing for this time of our lives is imperative for our survival. He concluded that our investments/savings act as a steady source of income during our retirement phase.

With the old conservative saving strategy, the money cannot last long as it cannot beat the rising cost of inflation. It will be over before you take your last breath and that you missed the train of the power of compounding because you did not invest in equities in your youth.

But now that Shekhar had completely missed planning for his retirement, should he go overboard and invest all his money in equities? Maybe he will be putting his entire savings at risk, as he is a couple of years away from his retirement.

The solution Rahul gave Shekhar was to diversify his investments across avenues suitable for retirees, once he attains his retirement year.

Rahul continued that most of the investment schemes for retirees are government backed. So, the risk involved is very less and to invest one must comply with the KYC norms.

But one needs to be cautious, as not all small saving schemes are able to beat the inflation and may hamper one's retirement.

Pick your post-retirement schemes carefully, so that it takes care of not only the regular source of income but also provides decent growth in the capital on your retirement corpus.

Here is the list of investment avenues one may consider for a blissful retired life.

Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Saving Scheme allows you to invest your hard-earned retirement corpus in a safe product and offers the benefit of quarterly interest payment (payable on the first working day of April, July, October and January). You can invest a one-time fixed sum in the SCSS, for a steady source of income.

It is a suitable investment that can be held by any retiree (single or joint with spouse) aged 60 years and above for a term of 5 years. An individual of the age between 55 years and 60 years who have retired on superannuation or under VRS can also open an SCSS account.

The scheme currently earns a decent interest of 8.3% per annum.

The total investment in the SCSS shouldn’t exceed Rs 15 lakhs and not below Rs 1,000.

The principal amount invested is eligible for a benefit under Sec. 80C of the Income Tax Act, but up to Rs 1.5 lakhs p.a. However, on premature withdrawal, a deduction charge is levied.

Under the SCSS, the interest earned is taxable as per the prevailing slab rates. However, TDS is applicable only if the interest income exceeds Rs 10,000 in a financial year.

On maturity of the SCSS account, you have the option to extend the account for another three years. But you need to apply within one year of maturity by applying in the prescribed format.

Post Office Time Deposits (POTD)

Post office Time Deposits work similar to fixed deposits. You can invest your money in these deposits for a pre-specified time horizon; i.e. 1-year, 2-year, 3-year, or 5-year tenure.

You can open the account either in a single name, or jointly, or even in the name of a minor (through a guardian) who has attained the age of 10 years.

The minimum investment amount is Rs 200, with no upper limit. However, the investment amount over Rs 1.50 lakh will not be eligible for any tax benefit.

A 5-Yr POTD currently earns an interest of 7.4% p.a., which is calculated quarterly but paid annually. The premature withdrawals are permitted only after a year from the date of deposit, subject to a penalty in the form of reduced interest rate.

The investment in a 5-year POTD qualifies for a tax deduction of up to Rs 1.50 lakh p.a. under Section 80C. But the interest earned on your investments is taxable under Section 80C.

Recurring Deposit (RD)

Recurring Deposit, a facility offered by Post Office and Banks, can help you gradually save for your future goals by allocating a small sum regularly.

5-Year Post Office Recurring Deposit Account offers you an interest of 6.9% per annum, compounded quarterly. Although the interest is calculated quarterly you will receive it only at maturity.

It is very convenient to invest in RD by cash or through cheque with a minimum sum of Rs 10 or in multiples of Rs 5 with no maximum limit of investment.

While the investment period in RD offered by banks varies from 6 months to 10 years the ones offered by post office come with a tenure of 5 years, with an option to continue for another 5 years on maturity.

You can open the account either in a single name, or jointly, or even in the name of a minor (through a guardian) who has attained the age of 10 years.

In case of 5-Year Post Office RD, one withdrawal up to 50% of the balance is allowed after completion of one year. It may be repaid in one lump sum along with interest at the prescribed rate. Nowadays most banks allow premature withdrawals on RD with a penal rate of interest charge.

Post Office Monthly Income Scheme (POMIS)

Post Office MIS is considered a preferred monthly investment avenue for individuals who seek to earn a regular income, especially after retirement. Any person in his individual capacity or jointly (by two or three adults) can invest in this scheme. However, post office MIS comes with a maturity period of 5 years.

You can invest in a multiple of Rs 1,500/- with a maximum amount of Rs 4.5 lakh for a single account holder, while joint account holders can hold up to Rs 9 lakhs in an account.

At present, the interest earned on a POMIS is at 7.30% p.a. which is compounded annually but paid monthly to take care of your monthly income.

While you can hold any number of MIS accounts in any number of branches of the post office, it does have a few restrictions. The total investment by an individual in an MIS account cannot exceed Rs 4.5 lakhs, including his share in joint accounts. This restricts the number of accounts an individual can open, either individually or jointly.

National Savings Certificates (NSC)

Issued by the Post Offices in India, the NSC is optimum for post-retirement earnings as there is minimal risk involved. NSCs have a fixed lock-in period of 5 years and offer tax benefits too.

The minimum investment amount required is in denominations of Rs 100 to Rs 10,000 with no maximum limit to investment.

While you may not be able to invest in NSC just like SIP in a mutual fund, you need to make a separate purchase of NSC’s every month, if you wish.

Currently, the interest rate on a 5-year NSC is 7.60% p.a. compounded annually, but payable at maturity; i.e. you will receive accrued interest along with principal on maturity.

Premature withdrawal is not possible in case of NSC unless there is an occurrence of an unfortunate event like the death of the holder, holder of certificate forfeiting them through a pledge, a court of law ordering the pre-mature withdrawal of NSC, etc.

The interest on NSC accrues annually but is deemed to be reinvested under Section 80C of IT Act. The deposits along with the accrued interest on NSC qualify for deduction u/s. 80C, subject to a maximum limit of Rs 1.50 Lakhs in a financial year. There is no TDS on the interest earned on an NSC.

Kisan Vikas Patra (KVP)

It is a small savings scheme which doubles the invested amount in approx. 118 months (9 years and 10 months), at the current rate of 7.3% p.a.

The interest income earned on KVP is taxable as per the tax slab of the investor and TDS at 10% will also be deducted. Moreover, the amount invested in KVP is not eligible for a benefit under Sec. 80C.

While one needs to invest a minimum of Rs. 1,000 in KVP and in multiples of Rs. 1,000 thereafter, there is no limit to the maximum amount of investment. KVP is issued in various denominations of Rs 1,000; Rs 5,000; Rs 10,000 & Rs 50,000.

You can prematurely withdraw from NSC, after 2 and ½ years from the date of issue. The amount you receive on such premature withdrawal depends on the period of your holding. This feature makes KVP liquid vis-à-vis PPF and NSC.

Mutual Funds (MFs)

Investment in mutual funds are linked to the market and are a little riskier as compared to the ones mentioned above. However, the impact of near-term volatility can fade over time and offer you a decent growth on invested capital.

If you are prudent, choose stable large-cap or hybrid funds with a suitable time horizon in mind. The investments in mutual funds can be later used as a monthly source of income through Systematic Withdrawals Plans offered by them. The returns from such funds may help you cope with the inflation during your retirement years so that the value of your retirement corpus does not diminish in value.

[Read: What Is A Mutual Fund? – A Guide to Mutual Fund Basics]

Sometimes, it is difficult to decide which funds to choose, but premium research services like PersonalFN’s FundSelect Plus.You can choose from 7 High-Performing, Time-Tested Readymade Portfolios offered under FundSelect Plus. These portfolios are backed by decade-long market-beating track record.

Our recommended portfolios have outperformed the markets by as much as over 80%! The best part is, these portfolios are crafted as per your risk profile and investment time horizon.

To conclude…

Shekhar regretted not investing earlier in life but learnt about various post-retirement schemes to erase some of his worries.

Although Shekhar missed the benefit of planning his retirement early, you can still manage a peaceful retirement by taking guidance from a certified financial planner.

I hope you too wouldn’t want to repeat the same mistake as Shekhar did and do plan your retirement earlyfor a blissful retired life. Reach out to PersonalFN’s Financial Guardians, on 022-61361200 or write to [email protected]. You may also fill in this form, and soon our experienced financial planners will reach out to you.

Author: Aditi Murkute

This post on " 7 Investment Avenues for Your Post-Retirement Portfolio " appeared first on "PersonalFN"

#Retirement #Postretirement #Financialplanning #financialdiscipline #personalfinance #financialinvestment

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