Retirement is the time when your ability to take risk is minimal and you want to carefully invest in risk free instruments.
In this phase of life, security of your hard earned money becomes paramount. So, if you are a retired person then its best if you invest where you get assured returns in safe instruments.
Below are the safe options in which you can consider in putting your money.
1. Fixed deposit at a bank or post office
One of the safest investment option is opening a fixed deposit account with a bank or post office. There is an additional interest rate available to senior citizens, which is normally 0.50 per cent.
However, if you get interest of more than Rs 10,000 on fixed deposits in a financial year then you have to pay tax. So you have to plan carefully before keeping your money into fixed deposits.
Click here to read how to increase returns from fixed deposits.
2. Senior Citizen Saving Scheme (SCSS)
A person who is 60 years (55years in case of VRS) can open SCSS account either in a bank or in a post office.
Maximum investment limit is Rs 15 lakhs. The tenure is for 5 years which can be extended to another three years more.
The account can be opened as an individual or jointly and can has a nomination facility.
Withdrawal is not permitted before the tenure of 5 years. However, premature closing of the account is permitted but with penalty. Investment under this scheme gives a benefit under SEC 80C but interests are taxable.
3. Monthly Income Scheme (MIS) in Post Office
MIS provides a regular monthly income to a senior citizen and the maturity period is 5 years. Currently, post office is paying an interest rate of 8.40 per cent under the scheme. Both, single and joint accounts can be opened.
The maximum investment limit for single account is Rs 4.5 lakhs and for joint account the limit is Rs 9 lakhs. The interest earned is taxable according to Income Tax Act.
This scheme is is suitable for senior citizens with less tax liability, but, interest rate is low compared to banks.
4. Debt mutual funds
Debt mutual funds invests in securities like bonds, corporate debentures and government securities. The investment objective of debt mutual fund is stable income and capital protection.
Tax efficiency on gains adds to the attraction. However, you must find out whether the debt mutual fund suits your risk tolerance level and investment goals before putting money.
You must keep a track record of the fund manager and performance of the fund.
5. Tax Free Bonds
Investing in tax free bonds is another good option. The tax free yield on these bonds vary between 8 to 8.75 percent making them an attractive investment option. Moreover, earnings does not have any tax burden.
Tax free bonds offered by Indian Railway Corporation and National Highway Authority in India (NHAI) pay you an interest rate of more than 8 per cent can be purchased from the Stock Exchanges.
You must choose the appropriate investment option depending on your need. You need to check the tax efficiency as well so that you get the right option that suits your requirement.