Many individuals opt for a Voluntary Retirement Scheme (VRS) offered by companies. It's important to remember that if you have opted for this scheme when you are in the late 40s or early 50s, you should invest the money wisely as you may have to use that money for several years. This is of course if you do not have any other source of income.
1) Do not use the money in high risk instruments
It would be foolhardy to invest the money in high risk instruments like equities and mutual funds with a large exposure to equities. This is because the money has to serve you as your retirement money and you cannot afford to erode your capital.
2) Avoid real estate as well
You should also avoid real estate investment, as these do not offer immediate returns and are more a play on long term. They might not also offer easy liquidity in case you have an emergency.
3) Avoid a lavish lifestyle
If you have retired early and have no alternate sources of income it would be important to conserve the amount of money you have. It's therefore important to keep reviewing your lifestyle.
4) Avoid starting a business with the money
Investing the money in a business could be risky. We are not saying that it would not pay-off. It could, but the element of risk would always be there.
Where to invest your VRS money?
Look for very safe options while investing. These would be highly safe corporate deposits which could offer you higher interest rates on bank deposits. Some of these include Kerala Transport Development Finance Corporation, Mahindra Finance etc.
These deposits offer you interest rates ranging from 9-10 per cent.
These are relatively safe and offer a slightly higher interest rates then bank. The other bet would be monthly income plans of post office. However, these offer a lower rate of interest in comparison to company fixed deposits.
You could also invest your VRS money in bank deposits, which are very safe.
It's important to remember that the money that you get should be invested safely as the time to take risk with the VRS amount is not advisable. You can always take risk at the start of your career and not at the end. Use the VRS money wisely in secure instruments as you need it to last as long as your alive.