For some people when life (career) starts at 30, for the most it ends at 60, though the life expectancy can be 85 or more. So, if a person retires at 60 and lives till 85, how will he survive when his source income has stopped? Most of the people will say that they have invested in their children and now they will look after them when they are aged, though the concept is right and holds true for many, but solely depending on your children can be a risky affair as they are still growing their income and you might feel comfortable to be financially dependent on your children completely.
The people who are going to retire soon or have retired in last few years can invest in the following investment options and schemes which can help them earn regular returns and also they can keep the tax factor at bay. After retirement you have the corpus of money that you have received from your company on retirement as PF, gratuity etc. invest that money in few of the different schemes so that your investments are diversified which reduces the risk and increases the return.
Government Of India Schemes
1. Pradhan Mantri Vaya Vandana Yojana – PMVVY: This plan was introduced last year which is modified in 2018’s budget and now anyone aged 60 and above can buy this scheme where the maximum investment amount is now 15 lacs and the interest or return rate guaranteed is 8%. So, if a person invests 15 lacs, he or she can get assured earning of INR 10000 per month. If the policyholder dies within the policy term of 10 years, the invested amount will be returned and if he survives then the last amount of pension along with the money invested will be paid.
2. Senior Citizen Pension Plan (Varistha Pension Bima Yojana): It is also a government scheme to secure the financial stature of the senior citizens in India and since this is an annuity plan, regular payouts are guaranteed. The minimum age for investment is again sixty years or more and rage of investment that one can make is from INR 63960 to INR 639610. The rate of interest on the scheme is 8% and after fifteen years the money accumulated from premium can be refunded if the policyholder dies or found having chronic diseases. One can take a loan against the policy to the maximum 75% of the money invested. Once can take monthly pay-outs from this scheme.
Investment on Tax-Free Bonds:
After retirement, people want to keep the tax factor away from their investments and one such tax-free investment option is the Tax-free bonds issued by the government organizations like Indian Railways Finance Corporation Ltd., NHAI, REC, NTPC, etc. The rates of interest received on these bonds are at par with the market interest rate and one of the best parts is that these bonds are not only tax-free but also risk-free.
So, if a bond is paying 8.1% interest on tax free return which is known as the coupon rate and a yield of 6.2%, if held till maturity, then the investor who buys the bond from the stock market (say the bond trades at INR 1210) will receive at interest at 8.1% and at maturity he will receive 6.2% on the bond as an actual return.
Balanced Mutual Funds and Short Term Debt Mutual Funds:
Mutual funds are always great investment options whether for short or long term. Since the senior citizen when retire can invest a good lump sum amount of money if invested in the mutual funds can earn higher interest than most of the fixed deposit financial instruments. Since the short-term liquid, MFs invest in equities and fixed income both, the generation of return are higher than most of the fixed income instruments. The investments are safe due to the fixed income component in it.
Fixed Income Instruments
1. Senior Citizens Savings Scheme: Anytime, fixed income financial instrument are better for the senior citizen as they need a constant flow of income after they retire to support their financial and personal requirements. The SCSS scheme is for the people who are at or above sixty years of age but the voluntary retirees can be 55 years as well. The highest amount that can be invested is INR 15 lacs and the number of accounts can be any.
One can also open a joint account with a spouse. The current interest rate 8.5% and it is linked to the market rate on the basis of 5 years of government yield of bonds. The interests are received by the investors on a quarterly The investment is deductible under 80C but the interest is taxable and the scheme has a very low risk of return.
2. Post Office Monthly Income Scheme (POMIS): The minimum amount one can invest is INR 1500 and the maximum is 4.5 lacs, in case of the joint account holder, it is 9 lacs. The current rate of interest is 7.7% and an account holder can withdraw the interest every month. But both the investment and the interest are taxable.
National Savings Certificate:
The NSCs are issued by the Indian government where the investment is deductible under section 80C of IT Act, investment above this amount is not deductible. The maximum amount of investment is not limited by any cap and the interest rate or the return on investment is at 8.1% and interest is compounded annually.
Share Market Investments:
Senior Citizens who are having free time at home and have knowledge of Share market can directly invest in shares or trade in it on regular basis for daily income. This will not only get them a constant income source but also a job which is interesting and engaging.
Since money is a constant need for a senior citizen, the income generation needs to be regular and the risk of the investment needs to be lower