Once the hustle and bustle of the working life take the permanent sabbatical, achieving the goal of generating a steady income during the retirement years is an important requirement, especially if a person is not a potential candidate to receive an inflation-adjusted pension. Listed below are some useful and safe avenues for those who want to spend their retirement with ease and generate a post-retirement income stream.
Once a person retires, money investment options become the challenge along with properly taking care of one’s finances in a safe and secure way in order to get a fixed monthly income.
Risks must be incurred and fought with strategy, but too much risk will not only exhaust the existing finances but also put a strain on the invested finances also. Searching for a middle path and a path that gives the retiree a sense of peace should be chosen. What are some of the best investment options post-retirement? Should a person only focus on debt or have a share of equity too?
In the absence of a fixed regular income, a person has to depend on external sources or financial institutions. Thus, having a regular source of income ensures financial independence and the freedom to live on one’s terms. Financial planning is still a board of consideration for many Indian citizens and oftentimes it is too late to start going. Fixed deposits are intertwined in people’s minds as soon as the thought of retirement planning arises.
At this juncture in time we can see that healthcare costs are skyrocketing and financially relying on one’s children is not a safe option, it’s more crucial than ever to make the most of one’s retirement finances. As an alternative to bank FDs, there are a variety of schemes in which a person may invest and receive larger returns while avoiding significant risks.
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Key Investment Schemes:
- Senior Citizen Saving Scheme: Schemes like the SCSS (Senior Citizen Saving Scheme) are very much suitable for those retirees who are looking for a high fixed rate of return. It also deals with inflation and has the potential for a regular flow of income. With the current SCSS interest rate set at 7.4%, it stands higher than what bank Fixed Deposits offer to its customers.
- Fixed Deposits with banks and Post Offices: these are also called term deposits and can be started in any bank or post office. They are safe and secure and they give guaranteed returns. The returns have been low in recent years that can be ignored for getting something that is absolutely secure. If an individual is a senior citizen (above the age of 60), he or she is entitled to get a higher rate of up to 50 basis points in many cases. A person has two options in FDs; they can either choose to have the interest accrued or get paid the interest regularly.
- Pradhan Mantri Vaya Vandana Yojana: The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is another most useful and suggested alternative as it provides a fixed monthly pension rate of 7.4% for a period of ten years. The plan has recently been extended to a 60-year-old submission age.
- Getting regular flows via approved pension plans: If a person is a government employee or retired from PSUs, then that individual gets regular pensions after retirement and a family pension after death.
- Conservative funds: A retiree may also consider looking at conservative funds; these funds have an asset grant of 85-90 percent debt and 5-10 percent equity and mainly revolve around the preservation of the invested capital. Investors who don’t want to take high risks can receive larger returns rather than if they had invested in a pure debt fund as these funds also have exposure to high-quality equities.
- ELSS Funds: There remains a question and debate on whether retirees should invest in these funds as this equity fund comes with and proposes market risk. But if the retiree is a taxpayer then ELSS is a great place to invest in because it gives tax relief and also a huge avenue for the higher wealth creation capability of this fund.
One cannot totally depend on debt after retirement so a minor investment in equity is warranted. Since these equity funds have a three-year lock-in period, a person is more likely to generate a stream of income from these funds. ELSS may not be a properly quoted senior citizen-centric product but it is a wonderful option for investment because of its market-linked working.
- National Savings Certificate (NSC): This post-office-based investment option is safe and a great way for retirees to invest and get a fixed flow of income. NSC certificates can be bought at any post office and are guaranteed by the government.