Retirement planning varies with each individual depending on their needs, requirement and risk capacity. Planning for retirement is a difficult task and should be done in such a way that all the financial needs should be taken care off, which may arise in the future.
Retirement planning is setting aside some amount or investing in some assets for the purpose of generating income at old age.
While planning for retirement, consider other expenses such as medical expenditure and emergency needs after retirement. Other investment such as children's education and marriage should be taken care and is not to be mixed with retirement options.
There are two stages of retirement planning, one is pre-retirement planning another is post retirement.
Here are few pre-retirement investment options:
The Public Provident Fund (PPF) is one of the popular investment options due to its attractive tax features.
An amount up to Rs 1.5 lakh invested in PPF and interest earned on it is tax-free in hands of the investor.
It is a low risk and one of the safe financial products. PPF is one of the best ways to build a corpus for retirement.
The National Pension Scheme (NPS) can be an attractive option as it is exposed to equity and equity related instruments. Investment in NPS is eligible for 80C deductions under the Income Tax Act.
At the time of retirement, it is mandatory to purchase an annuity of 40 per cent of the corpus accumulated.
Employee Provident Fund (EPF) is popular among salaried individuals and one can build a solid corpus over the years. Interest earned on the EPF is tax-free in hands of the investor. To reap the benefits one has to stay invested and EPF should be transferred in case of a job change.
No financial product can match returns from equities over time. However, the investment can be made directly in equities or equity related instruments including equity mutual funds.
Investment made should be considered for long term at least 8-10 years to get the best return.
The investment made in property such as flat or site can give you monthly returns in the form of rent. Make sure to invest considering the location of the property and look for help from experts.
There are a variety of options from insurance companies and mutual funds which offer pension products. One can buy annuities, which gives you a choice in structuring the post-retirement benefit pay-outs.
Monthly Income Plan
One can also get into the Monthly Income Scheme of the post office or banks. This plan ensures regular interest income.
This ensures safety and liquidity of funds. The rate of returns in monthly income plan of the post office is set by the government on a quarterly basis.
A lumpsum amount is invested across various instruments to provide you monthly income.
Senior citizens saving scheme (SCSS) is one of the safest and most preferred investment options. Any retired individual can open SCSS in banks or post offices. As of now interest rate is 8.6 per cent which will be revised by the government every quarter.
This is one of the ways to increase cash flow stream of senior citizens in order to address their financial needs. It is a type loan given to senior citizens by converting the equity in a house property into an income stream.
In this scheme, the senior citizens will pledge their house property to the bank in return for a lump-sum payment or periodic payments spread over the borrower's lifetime.
One can consider investing money in fixed deposits andcan opt for monthly income or quarterly income payment options.