In the absence of regular income, one has to depend on others or compromise on one's necessities. Hence, having a regular source of income can ensure financial independence and the freedom to live on your terms. In India, financial planning is still a long way to go. And when it's about retirement corpus investment most people don't even think about options other than saving and FDs.
At a time when health-care costs are growing and financial reliance on children is dwindling, it's more crucial than ever to make the most of your retirement nest egg, your only source of income. As an alternative to bank FDs, there are a variety of schemes in which you may invest and receive greater returns while avoiding significant risks.
1. Senior Citizen Saving Scheme
Schemes like the SCSS (Senior Citizen Saving Scheme) are suitable for those looking for a high
fixed rate of return that beats inflation and promises a regular stream of income. With the current SCSS interest rate set at 7.4%, it stands higher than what bank Fixed Deposits have to offer.
The interest received is taxable, the amount deposited under this scheme is deductible under Section 80C. You can open a single or joint account with your partner if you are above 60 years old.
The minimum amount cap is also set very low at Rs 1,000, with an initial tenure of five years and a one-time extension of three years. However, your total amount invested should not exceed Rs 15 lakhs.
2. Post Office Monthly Income Scheme
At a slightly lower rate of 6.6%, you can also avail of the Post Office Monthly Income Scheme, which has a tenure of 5 years and an investment cap of Rs 4.5 lakh for single account holders or Rs. 9 lakh for jointly in the Post Office Monthly Income Scheme (POMIS).
This is a government-sponsored scheme, the safety factor is strong, and the risk of losing money is low. Furthermore, these have the potential to give you appropriate profits. However, it is important to remember that this scheme does not offer any tax benefits.
3. Pradhan Mantri Vaya Vandana Yojana
The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is another potential alternative since it provides a fixed monthly pension rate of 7.4% for a term of ten years. The plan has already been extended until March 31, 2023, with a 60-year-old entrance age.
PMVVY investors can choose between quarterly, half-yearly, or annual payouts. This plan has no tax advantages, but it is a superior investment alternative in terms of liquidity since, after three years, 75 per cent of the invested money is accessible as a loan, with any unpaid loan amounts being applied to the principle.
In essential instances such as medical crises and more, withdrawal deductions are also fixed at 2% before 10 years.
4. Conservative funds
You might also look at conservative funds, which have an asset allocation of 85-90 per cent debt and 5-10 per cent equity and are primarily concerned with capital preservation.
Low-risk investors can receive greater returns than if they invested in a pure debt fund since they are exposed to high-quality equities.
These funds are also well-suited to investors seeking consistent returns as well as those with long-term financial objectives and low-risk tolerance.
In addition, consider investing in short-duration funds if you still have a surplus for your fixed-income exposure.
5. Bank Fixed Deposits (FDs)
Another common option for retirees to invest retirement savings is a bank FDs. Bank FDs are widely appreciated for the security and predictable returns, and the ease of operation makes them a solid option.
However, the interest rate has been declining in recent years, which makes it a slight outdated investment.
Bank deposits provide flexibility in terms of duration. As a result, rather than locking money for a specific time period, an investor can distribute the funds across many maturities. It controls the-investment risk' as well as provides liquidity to funds.
The five-year tax-saving bank FD may be a better alternative for people wishing to save money on taxes. The investment made here is eligible for a tax break under Section 80C. However, such a deposit will have a five-year lock-in period and will not be able to be withdrawn early. Even though interest income is taxable, the amount of tax avoided is offset at least in the year of investment.