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Retired? Make informed decisions related to your investments

Retirement is like a long vacation in Las Vegas. The goal is to enjoy it to the fullest, but not so fully that you run out of money –(Jonathan Clements).

Retirement can be great joy all through your life if you have sufficient money to spend. One of the greatest difficulties after retirement you may face is handling of lump-sum money you have received from PF, Gratuity, Leave encashment, commutation of pension etc. For the investment of retirement corpus, you will have to structure your investments in two ways.

The first step is that you will have to keep a certain amount of money for investment under monthly investment plans details of which we will discuss in the later part of this post. The monthly income plans reflect in a way to give you regular income that comfortably covers your regular expenses, besides added expenses like medical expenses, traveling expenses, payment of taxes, spending on social engagements and so on.

Secondly, you have to think about reserving higher principal amount from retirement corpus for long term safe investments which generate a higher income. This is with a view to offshoot your higher expenses which will go up over the years due to inflation.

Let us look at safe investment avenue available to retirees.

(The rate of interest on Small Savings instruments are subject to change on each quarter (Feb-Apr, May – July, August-October, November -January).

On the basis of the decision of the government, interest rates for small savings schemes are to be notified on a quarterly basis,” the ministry said while notifying the interest rates for the fourth quarter of 2016-17. The interest rates on various small savings instruments will be as under for the period January to March 2017.

Bank deposits: Banks accept special fixed deposits with interest payable at a regular interval (monthly/ quarterly) as per customer’s requirements. The interest rate is the same as applicable to prevailing fixed deposits. You can think about investing in bank deposits under monthly/quarterly income scheme to meet your regular expenses. In India, all the banks offer interest around 7.00-7.50% +0.50% interest to the senior citizen over their card rates. You must know that interest rates offered on fixed deposits by banks are not uniform. To know the details click wiki-deposits

In India, all most all the banks offer interest in the range of 7.00-7.50% +0.50% interest to the senior citizen over their card rates.Different banks (including public sector banks) offer the different rate of interest for the various period of maturity. To compare the latest rate of interest offered by various banks click deposit rates

Tax Saver Fixed Deposits issued by Banks: An individual or HUF can invest in Tax saver fixed deposits of banks, not exceeding the aggregate limit of Rs.150000.00 u/s 80 (C) of IT in a financial year is eligible for tax relief. The ‘deposit’ can be opened in single name or joint names of an adult with a minor or in the joint names of two adults, payable to either or survivor.  The Joint account cannot be opened for more than two people. In the case of joint accounts, only the first named person in the ‘Tax Saver Deposit’ can claim the tax rebate.Interest offered to these deposits are almost same (7 to 8%) applicable for fixed deposits for a period of 5 years.For more details click Tax Saver Deposits

Senior Citizen’s Savings Scheme (SCSS): Investment in Senior Citizen’s Savings Scheme is a good option for regular income. The scheme offers 8.50% (subject to change in every quarter) assured return and investment is eligible for income tax rebate u/s 80C. The maximum investment permitted under this scheme is Rs.15 lakh. Return on the investment is accounted for taxable income. Tenure of the SCSS deposit is 5 years, which can be extended by 3 years. Premature closure permitted after one year of opening the account but with the penalty. Investment to be made in multiples of Rs.1000.Interest compounded on quarterly rest.  Minimum eligible age for investment is 60 years (55 years for those who have retired on superannuation or under a voluntary or special voluntary scheme). The retired personnel of Defence Services (excluding Civilian Defence Employees) will be eligible to invest irrespective of the age limits subject to the fulfillment of other specified conditions. SCSS is issued by the Post office and designated branches of Public sector banks and ICICI Bank. For more information click SCSS details

Systematic Withdrawal Plan (SWP): If you are coming under higher tax bracket, you can think of investing in short-term debt funds to avoid higher rate of tax. The Systematic Withdrawal Plan (SWP) of mutual funds is just opposite of SIP. It is a short-term debt fund where Mutual funds provide monthly income plan to the investor with a provision to either to increase or decrease their monthly withdrawal or change the frequency of withdrawal monthly to quarterly. The payout can be made from capital appreciation and principal. If capital appreciation of the investment is less than the withdrawal amount then principal amount invested by you may erode. Investors are liable to pay capital gain tax (short term/long term) on their SWP investment.

Continuation of PPF account after maturity:  PPF account holders have an option of extending their accounts after the 15 years tenure with or without the further subscription, for any period in a block of five years. Return on the investment is 8.00% (Rate is subjected to revision on every quarter). The balance in the account will continue to earn interest at the normal rate as admissible on PPF account till the account is closed. In case the account is extended without contribution, any amount can be withdrawn without restrictions. However, only one withdrawal is allowed per year. If you continue the account after 15 years, with continued deposit, withdrawal up to 60 percent of the balance at the beginning of each extended period (block of five years) is permitted. To know more click on PPF

TAX rule (EEE):  Investment in PPF is eligible for tax exemption u/s 80C IT act. Income is exempt from tax, and Redemption proceeds are not added to tax

ELSS (Equity-Linked Savings Scheme): ELSS is an open ended diversified equity fund offered by mutual funds. In this scheme,  the investor’s money is chiefly invested in the portfolio of equity shares. In the recent past, investment in ELSS has given very good returns to the investors even in the bearish market.

In the recent past, investment in ELSS has given very good returns to the investors even in the bearish market (18.5% average annualized return for 3 years, 17.50% in the past 5 years).

To know more (Click) ELSS

TAX rule (EEE):  Investment is eligible for tax exemption, Return is eligible for tax exemption and Redemption proceeds are free from taxable income.

Click here to read: Reverse mortgage loan scheme, windfall to senior citizen

Related articles

Interest rates on small savings schemes

Figure out the tax saving instruments which suits you most
Know about PPF account benefits
Investment in Sukanya Samriddhi Scheme
Income-tax rebate on the purchase of NSCs


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All about different kinds of Mutual funds
Arbitrage funds for risk-free investments
Distinction between liquid fund and ultra-short funds

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