For a retired person, investment options are limited as one needs to look at safer options. So it’s more of capital protection and rather than high returns, one should aim at when you are retired. In this article, we talk about some of the investment ideas for the retired so that they can happily bear their monthly expenses and can live life independently.
- Post Office monthly income Scheme (POMIS): Amongst the most simple and safe ways to receive monthly income after your retirement. POMIS is a five-year investment plan with a maximum cap of Rs 9 lakh under the joint account and Rs 4.5 lakh under a single account. Here, you will get quarterly interest, and the interest rate is 7.8% per annum, payable monthly. Your interest will be credited directly to the savings account of the same post office. You won’t get any tax benefit for POMIS, and your interest is fully taxable.
- Bank fixed deposit: This is another good choice for all the retirees. Though this is a safe investment and gives a stable return, the interest rate goes up and down on the basis of the inflation in the economy. At present, the interest rate is nearly 7.25 per cent per annum for tenures ranging from 1-10 years. Most banks offer an extra 0.25-0.5 per cent per annum to the senior citizens. The interest rate varies from bank to bank. Some benefits of bank fixed deposit are
- Guaranteed income
- Eligible for partial withdrawal
- Loan facilities are available
- Automatic renewal
- Safe and secure way to earn money
- Senior Citizen’s savings scheme (SCSS): This is the best investment policy for all the retirees as it is specially designed for all the senior citizen employees. Anyone above 60 years can get SCSS from the post office or a bank. Even early retirees can invest in SCSS, but they need to do within one month after receiving their retirement funds. Under SCSS, you can open a joint account with your spouse only, and the current rate of interest is 8.6% per annum. Some benefits of SCSS are
- You can open more than one account
- Your investment is eligible for tax benefits under Section 80C
- Though the tenure period is five years, it can be extended up to 3 years once your scheme gets matured.
- Mutual funds: A retired person can invest a portion of his retirement fund into equity mutual funds, but mainly large-cap funds and balanced funds with some portions being allocated into monthly income plans (MIPs). It is better to stay away from thematic and sectoral funds, including mid- and small-caps. But if one has a higher risk appetite, they can allocate a small portion of their investments into such funds. You should also invest a large part (at least 50% if not more) of your MF investments in debt mutual funds so that you are not affected by equity market’s ups and downs. Also, the taxation of debt funds makes it a better choice over the bank deposits. Debt MFs are especially ideal for those who are in the highest tax bracket. As for deciding how much to invest in equity, a thumb rule is to reduce your age from 100. For instance, if the person’s age is 55, he should invest 45% of the corpus in equities.
- National savings certificate (NSC): This savings bond is introduced by the Indian Government and is used for small savings and income tax saving investments. You can purchase the form from any post office. The maturity period of these bonds is five years or 10 years. Some benefits of NSC are
- The interest rate is 7.6% per annum
- No highest limit for investment
- The holder is eligible for tax benefits under Section 80C of Income Tax Act
- No tax deduction at source
These are some of the investment ideas you can consider during your retirement life.