Once you retire, you have big the challenge of man aging your finances in a smart and secure way. You have a dilemma. You need to take risk to enhance returns but you cannot afford to take on too much risk. Finding the mid way is the key in this case. What are some of the best investment options post retirement? Should you only focus on debt or have a share of equity too? Remember the old saying, “Gentlemen prefer to invest in bonds”. Let us look at five such post retirement investments options in India which strike that perfect balance between risk and returns.
1.Fixed Deposits with banks and Post Offices
Fixed Deposits (FD) or term deposits can be started in any bank or post office. They are safe, secure and the returns are guaranteed. One can complain that the returns are low and they have been falling sharply in the last few years. But that is the trade off for getting something that is absolutely secure. If you are senior citizen (above the age of 60), you are entitled to get a higher rate of up to 50 basis points in many cases. You have two options in FDs; you can either choose to have the interest accrued or get paid the interest regularly. You can open FDs with a bank or a post office and both are guaranteed and equally safe. However, there is something you need to know about the tax treatment. Senior Citizens have exemption on FD interest up to Rs.50,000 per annum and also there will be no TDS. So the typical hassles are overcome and your post tax returns go up sharply.
2.Getting regular flows via approved pension plans
If you are government servant or retired from PSUs, then you get regular pensions after retirement and family pension after your demise. However, if you are not a government servant then you need to plan your own pension via pension investments. Pension plans allow you to superannuate part of your pension and pay part as regular income. Pensions are essential to run your regular costs and your monthly expenses. You also need to pay for your medical insurance because if you not from the government then you do not have access to CGHS services.
3.Senior Citizens Savings Scheme (SCSS)
This was a special scheme that was launched specifically for the benefit of retirees and senior citizens and is not open to the general investing public. This SCSS scheme is customized and tailored to the needs of senior citizens and can be purchased from banks and post offices. The maximum amount you can deposit in a SCSS is restricted to Rs.15 lakh and the tenure is 5 years, with an option to extend it by an additional 3 years. Interest rates on SCSS (@ 8.5% to 9.5%) are higher than other investment options. But there is a trade-off here. This makes a lot more sense if you tax assessee because the investment made in Senior Citizens Savings Scheme is tax-deductible under Section 80C. However, the interest earned on it is taxable at your peak applicable rate of tax with no exemptions.
There is a debate on whether retirees should invest in ELSS since it is an equity fund with market risk. However if the senior citizen is a tax assessee then ELSS is a great idea because of the tax relief and also due to the higher wealth creation potential in this product. You cannot totally rely on debt after retirement so a small exposure to equity is warranted. Since they have a 3 year lock in period, you are more likely to create wealth in these products. ELSS may not be a typically senior citizen-centric product, but is an excellent investment choice because of its market-linked nature. It is also tax efficient in the sense that amount you invest in ELSS is exempt from taxation under Section 80C, long-term capital gains tax charged at a concessional rate of 10% above Rs.1 lakh and the tax on dividends is also not applicable, except the DDT of 10%. The low minimum investments can be an added advantage.
5.National Savings Certificate (NSC)
NSC is another Post Office-based savings scheme that offer good returns and are a safe form of investment because it is guaranteed by the government. NSC certificates can be bought at any post office in multiples of Rs. 100 every month for 5 years, with the minimum contribution being Rs. 100. There is no ceiling and NSC gives an interest of 8.1%, which is subject to change from time to time. While interest on NSC is taxable, the invested amount qualifies for tax exemption under Section 80C within the overall limit of Rs.1.50 lakhs per annum. Premature withdrawal is not permitted but you can easily get a loan against NSC.
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