When you retire, your usual source of income stops since you are not working any more. Some companies offer pension benefits for their retired employees, but the amount is usually not enough to manage your expenses for the next 20 years or so. The best way to ensure a steady income for your retirement days is to invest your savings in a good retirement plan. If you are planning to invest your hard-earned money or retirement benefits in a scheme, you can find some suitable options here.
Many finance companies come up with special investment schemes and plans for the retired people. Understandably, retired people are not open to investment risks. That is why it is important to find a retirement plan that guarantees secure returns. Take a look at the top investment opportunities for retired persons in India.
Senior Citizens Savings Scheme (SCSS)
This is a special investment scheme supported by the government of India. The plan is designed keeping retired people in mind. Since it is backed by the Indian government, it can be regarded as one of the safest investment options for retirees. The current interest rate is 8.4 per cent. One can opt for this scheme through any post office or affiliated public sector bank.
Investors must be aged 60 or more to leverage this scheme. The minimum age limit is 55 in the case of voluntary retirees. Investors can also choose to credit the annual interest directly to their bank accounts or they can have it sent by post. The pension account can be prematurely closed by paying a fine after a year.
Fixed deposit (FD)
A fixed deposit with a bank is another good investment option for retirees. It keeps your money safe and ensures fixed returns after a period. This is also one of the easiest investment methods, especially if you already have a bank account. Interest rates of fixed deposits may vary between 7 and 8 per cent, and the deposit period usually spans 1-10 years. Some banks also offer an added interest for senior citizens.
The best advantage of this investment scheme is the term flexibility. Investors are not bound to invest their money for a specific period. Instead they can invest their funds for short periods and in multiple schemes. This ensures a regular income flow and helps avoid the re-investment risk. If you want to save tax, you can consider investing in the five-year bank FD plan that qualifies for tax benefit under Section 80C. But this scheme is locked for five years and cannot be ended prematurely.
Post Office Monthly Income Scheme (POMIS)
The best thing about this scheme is interest is paid monthly and you have a fixed source of monthly income. It is a five-year investment plan, and the maximum deposit limit is Rs 9 lakh for joint accounts and Rs 4.5 lakh for single-owner accounts. Interest rate of POMIS is slightly lower than the SCSS but higher than what is offered by FD schemes.
The investment and interest amounts in this scheme are not qualified for any tax benefit. Investors can get the interest deposited directly to their savings accounts each month. A penalty amount is also charged for premature closing of the account.
This is a suitable income option for retirees who have houses or properties to reverse-mortgage. In this case, banks allow you to acquire a loan by keeping your house or property as a collateral. The loan is paid by the bank in the form of monthly or quarterly payments, as decided by you. The loan amount in such schemes is usually equal to the market value of the property. As it is a type of loan, the interest rate can either be fixed or changing.
This is an attractive option and the idea is to keep a stable source of income for as long as you live. The loan period for reverse mortgage is usually 20 years. After this, the bank can sell the property to settle the loan amount. The excess amount generated in the transaction is assigned to the beneficiary.
Mutual funds (MFs)
A mutual fund is another reliable investment option for the retired people. One may consider investing a part of their retirement funds in the equity mutual funds. This can be a beneficial option as the returns here are not impacted by inflation, unlike simple bank investments. But this is a riskier operation and one should never invest more than a small part of his/her money into such schemes.
The above five are the most popular investment options for retired persons. But always consult an expert banker or a financial advisor before investing.
Naval Goel is founder of PolicyX.com.