Not all people have retirement plans, but some of them realize this really late. Planning your retirement can be effective if you start saving for it as soon as possible. A sustainable income at a very lower tax charges, kind of a plan should be effective for a retiring person. People retire at the age when they can’t do a 9 – 5 job anymore, but yet if planned way in advance, the future can be a well enough in terms of earning even after retirement.
So it’s important to understand some of the best investments that can help you plan your retirement with ease. These mentioned schemes below will help you design the best retirement plan for yourself.
1.Senior Citizen Saving Schemes (SCSS): This scheme is only available for the person who’s reached the retirement age. This kind of investment can be availed from a bank or a post office, wherein anyone above 60 can approach directly to these centers and apply for it, provided that they invest within three months of receiving their retirement funds.
2.Usually, the rate of interest offered for this investment is 8.6% p.a. payable quarterly and tax are charged on the return as per the slab where the investor lies. The maximum limit for investment is INR 15 Lakhs and multiple accounts can be opened. Investment in SCSS has a tax deduction under section 80C.
3.Fixed Deposit: This is one of the most common investments done by many of us, due to government assurance of returns and being safe in the market. As we know the rate of interest in this section is falling every year, with the current rate of interest somewhere around 8.30%. These have a tenure period of minimum one year to 10 years. An additional 0.25 – 0.5% interest is also given to senior citizen fixed deposit investors.
Many investors in FD do not put all their investment in a single FD, but allocate funds into different tenure FD to provide liquidity to funds, and also manage re-investment trouble. When the shortest FD matures it can be renewed to a longer tenure and this process is maintained till all the FD matures. FD does qualify for Tax deduction under section 80C of Income tax.
4.Post Office Monthly Income Scheme (POMIS) Account: This type of investment is available for a minimum lock-in period of 5 years where the maximum capital invested should not be more than INR 9 Lakhs under the partnership or Joint ownership, and INR 4.5 Lakhs under single ownership. The interest rate is of 7.8% calculated annually and paid every quarter. This type of schemes does not have any tax deduction benefits but the interest earned is completely taxed. This interest is usually credited to the Post Office Savings Account and can be further transferred to a recurring saving account in the same post office.
5.Mutual Funds: As we know that equity returns are higher than the other assets even in a phase of inflation. Mutual funds in equity can be risky, and a well-planned analysis is required in this type of such investment and returns are taxable. One should spread the investment in mutual funds with categories across the large cap and balanced funds like MIPs (monthly income plan). Look out for thematic and sectoral funds, including mid and small cap, in order to generate stable income rather than high but volatile returns.
Debt MFs are also a good option for retiree’s plan, taxation of debt funds saves big time for those in the high tax bracket. Income from debt mutual funds gets taxed at 20% after indexation.
6.Tax bonds: A retirement plan can also consist of tax-free bonds these bonds are issued by the government supported organizations like Indian Railway Finance Corporation, Power finance corporation Ltd. National Highway Authority of India. These bonds are sold or bought on the stock exchange as they are listed securities. These are long term investments such as 10 years 20 years and so on, hence one should plan such investment really early in planning your retirement. The interest is tax-free, but there is no tax exemption given to such investments.
7.Immediate Annuities: This is also a very common investment among retirees. The pension paid in such investment is around 5-6% p.a. and tax is charged on the full income received. There are different options available for pensions like pension for a lifetime, and pension to dependents after any incident in life.
Hence it’s advised to diversify your investments, and asset allocation is very important in terms of getting maximum return benefits and these are the best investment options for senior citizens.
July 08, 2017
July 08, 2017
Stories by Richa Sharma