5 investment options for senior citizens
Are you asking these questions to yourself off-late? – How to deploy the retirement cash for stable and regular income? How to generate steady income after retirement?
How to invest the retirement money? What are the best investment for retirement lumpsum? How do I get a pension? Then this post is for you!
We hear many investment ideas during our working years – what should be done in 20s, 30s, and 40s etc. to save a good corpus as a retirement planning for good retired life. In this post we will aim to discuss the pressing points on what should we do with our retirement money. We will try to create a financial plan for regular income post retirement and contingency plan for a comfortable retired life, especially if you don’t have an adequate pension plan. Let us answer the pressing points first.
What to do with the retirement payout you get from EPF, Gratuity, ex-gratia and leave encashments?
If we are talking about your entire financial assets here, we should get into a simple financial planning. a) Regular Monthly income b) Emergency Funds c) Health Insurance premium d) kitty for travel/leisure activities, – the four pillars of after retirement financial planning.
After retirement there would be some shift in your cashflow arrangement, you won’t be earning a salary in your account, your working medical benefits from employer may not sustain post retirement. With longer life expectancy, you are likely to live a longer retired life. Longer life however, doesn’t promise a healthy life, hence, medical cost likely to increase. Though there is a threat of increased medical cost, health insurer will charge you higher premium for lesser insurance coverage.
On the balance, you may not have any Home loan to pay, Child education would be covered. So, you should plan vacations, leisure activities too as per your income and retirement kitty.
So, it is wise to set aside at least a years’ expense in a liquid instrument like FD/ Liquid Mutual Fund etc. to cover any such emergency which may arise. After emergency planning, we can create a stream of regular income through planning your financial portfolio with following tools for a safe avenue and income. Let us look at the avenues to earn regular income post–retirement. Some of the post retirement investment options are as follows
- Immediate Annuity policy/ schemes – Annuity schemes are available with all the life insurance companies in India. It offers slightly better rates than Fixed deposit rates. However, taxed as per income slab. One can buy it after retirement and choose a income term. There are a few options on income and maturity, it can be compared at a insurance aggregator site like policy bazaar.
- Senior citizen Saving Scheme (SCSS) – This is a five year fixed deposit scheme available with Bank, this offers higher interest income compared to Bank deposit, a steady income scheme, having a lock-in for 5 years and interest income is tax-free.
- Pradhan Mantri Vaya Vandana Yojana – Launched in Mid 2017, this scheme has a extended window till 2023. Under this scheme, retirees over 60 years can buy PMVVY. This is a one time premium. One can buy this scheme with LIC and opt for monthly, quarterly, half yearly or annual payout. It is a guaranteed income scheme with 10 years tenure, on investments made in the FY 20-21 till March 31, 2021, the interest rate of 7.4 per cent payable monthly i.e. 7.66 per cent per annum for the entire duration of ten years. It has a minimum investment requirement of Rs. 1.56 lakhs. The maximum premium can be Rs. 15 lakhs per person, The investment varies depending on the interest payment frequency. However, there is no tax benefit on this. Income will be taxed as per income slab.
- Liquid Mutual Fund (Debt Fund) through Systematic Withdrawal Plan – This can be a option. Within debt mutual funds, this is considered to be the safest category of fund. One can put a lumpsum amount in a good liquid mutual funds scheme and opt for monthly/ Quarterly/ Half-yearly SWP. One can choose particular Units / fixed amount to be withdrawn in a given frequency. It can generate a fixed income. This scheme offers return at par with short-term fixed deposits or savings schemes but it is tax efficient compared to FDs. As the name goes, this is the most flexible deposit scheme and can be withdrawn or redeemed at any given point. This option can be used for keeping emergency fund as well. Mutual Funds also offers various Monthly Income Plans in debt and Hybrid category.
- Monthly Income plans – Post office offers MIS scheme, many good NBFC Companies also offers monthly income schemes and offer higher interest rates for senior citizens. But you should be aware and comfortable with the scheme, it is a good idea to check with your financial planner/ advisor to opt for such schemes.
There are many Post retirement investment options, but there is no requirement of continuing the life insurance unless and until you have any financial commitments and responsibilities, but health insurance take priority here. With growing life expectancy and sky-rocketing medical expenses, having health insurance is must. The health insurance companies offer various insurance plans for senior citizen, you should choose carefully.
The best time to start your retirement is as early as you can, to accumulate maximum wealth – National Pension Scheme – NPS is one of thee best scheme available to support your future pension needs if you contribute regularly. However, it is never too late. There are many financial products available to secure your retirement, however, it is important to do some research, plan according to your requirement.
There is nothing called best investment, you need to plan your investment to best suit your financial needs. It is wise to take help or guidance of an financial advisor to make a solid plan for your financial well being.
