Retirement marks a turning point in a person’s life. The routine life that one has undergone for so long is set to change forever. All those years that you had worked to save for retirement finally arrives and marks the end of your career, but does it? Not for everyone though some retirees choose to take their careers in a different direction. But for others? Retirement means focussing on getting a regular stream of income while keeping tax liability at bay. The main hurdle that most retirees face is that though they retire at 58 or 60 the life expectancy can be stretched to 80 and above. So the main issue is making a financial planning for seniors which can ensure a fixed income every month and pay more than your monthly expenses.Financial Planning Tips for Senior Citizens
Senior Citizen Financial Planning – A Few Important Investment Options
Here are a few senior citizen financial planning options for you to explore to fulfill your monthly requirements and some more.
Senior Citizens’ Saving Scheme (SCSS)
Senior citizens must include the senior citizens saving scheme in their investment portfolios. The name should give you an idea that this scheme is suitable for the senior citizens only. Avail this scheme either from the post office or the bank. The SCSS, although has a five-year tenure, it can be stretched to three years as the scheme matures. 8.6 percent per annum is the interest rate of SCSS which you can pay quarterly and it is fully taxable. You can invest as much as 15 lakh and for that, you may open more than one account. You can enjoy tax benefits too from this scheme and you can also withdraw it prematurely.
Bank fixed deposits (FDs)
most retirees stick to bank fixed deposits or (FD) as they consider it safe. The safety and fixed returns go well with the retirees, and the ease of operation makes it a reliable avenue. However, bank interest rates have started dwindling in the recent years. Currently, it stands at around 7.25 percent per year and tenures range from 1 to 10 years. Senior citizens get an extra 0.25-0.5 percent per annum, depending on the bank. A few banks offer around 7.75 percent to seniors on deposits with longer tenure.
(POMIS) Account or the Post Office Monthly Income Scheme
POMIS has an interest rate of 7.8 percent per annum and is payable monthly and you can invest as much as Rs 9 lakh jointly with your spouse or any other relative. You won’t get any tax benefit from this scheme and the interest is fully taxable.
If you are thinking you have to go to the post office every month no, you don’t have to, as the interest is directly transferred to the savings account of the same post office.
Mutual funds (MFs)
The chief fear among retirees is a non-earning period looming large before you for another two decades or more and to prepare yourself for those years choose equity-backed investment schemes. As your retirement income (through interest, dividends, etc.) is expected to be hit by inflation and that is a tough situation to be in so, prepare yourself well for such unforeseen situations. Research has shown that equities provide you with greater returns than any other assets.
Of course, mutual funds are subject to market risks and the only w ay you can shield yourself from that is by keeping a certain percentage into equity mutual funds (MFs) and investing in large-cap and balanced funds and also dabbling in monthly income plans (MIPs). The focus of retirees should be investing in large-cap balanced funds and not go for ones which provide volatile returns such as thematic and sectoral funds. After all, to a retiree, a stable return is much more feasible than volatile returns.
Tax-free bonds are not presently available in the primary market, but it can be a lucrative proposition for a retiree to invest in. Since they are mostly government-backed they are less risky to invest in. Some of the government-backed institutions are as follows, National Highways Authority of India (NHAI) Indian Railway Finance Corporation Ltd (IRFC), Rural Electrification Corporation Ltd (REC), Housing and Urban Development Corporation Ltd (HUDCO) and Indian Renewable Energy Development Agency, Power Finance Corporation Ltd (PFC) and they usually come with great safety rating, a much-required criteria by retirees.
- Immediate annuities of Life Insurance companies
At 5-6 percent per annum, the pension or annuity is fully taxable too. The amount used to purchase the annuity cannot be returned back to you. You can go for immediate annuity products which offer a number of options catering to your individualistic needs. One such example is LIC Jeevan Akshay VI, this is an immediate annuity plan where you can receive annuity payments at 9.35% for life. However, once the investor dies, the annuity payments stop coming for the spouse. There is another option too where the investor receives the payments at a certain rate for a stipulated time irrespective of the death of the investor.
So have you started your senior citizen financial planning? Not yet? You need to start as soon as possible to make sure you enjoy your post-retirement years to the full extent! Try the above financial planning for senior citizens and let us know what worked for you and what did not in the comments section below.
Sixty plus is an organization devoted to the cause of senior citizens. We offer financial services and help retirees zero in on the right investment options customised to their needs.