INSUBCONTINENT EXCLUSIVE:
Retirement Planning: The key to a successful retirement life lies in sowing a seed in adulthood.Retirement brings the onset of the winter of
You are no longer in active service, there is no regular source of income and even your health may start failing
But proper financial planning can ensure a steady flow of income in post-retirement years, say experts
The key to a successful retirement life lies in sowing a seed in adulthood
You need to focus on building a robust retirement corpus right from a young age
Multiple investment avenues like mutual funds, Public Provident Fund (PPF) and National Pension Scheme (NPS), among others, can help you
instruments and the timing of the investment depends on an individual's risk profile and the amount of income that can be generated, said
Lakshmi Iyer, CIO (Debt) and Head - Products, Kotak Mutual Fund."In the initial years, risk assets like equity play a vital role in creating
'reserves' for the future
Gradually, as one approaches retirement, the asset allocation generally tends to skew towards a moderate risk-profiling
It is vital that one should ascertain one's risk profile and longevity associated with investments before initiating them," she said.The
maximum allocation should be in debt instruments for the purpose of retirement security, said Aditya Maru, Founder, Augain Wealth management
"The retiree cannot afford to risk losing his retirement corpus
There is no active regular income post retirement
It is essential to invest only in those options which are tailor made for retired people", said Mr Maru.How can one start investing for
post-retirement yearsThere are numerous options one can look for in order to get a regular income after retirement
However, all investment schemes are not tax-efficient.10 investment options that you can consider for having a regular income
Fixed Deposits (FDs): FDs are the best option for people looking for an assured income after retirement
It is safe and convenient
Having a fixed return provides a reliable source of income for retired people
Fixed deposit interest rates vary across banks
Post offices and companies also offer fixed deposits
However, corporate fixed deposits do not guarantee an assured interest income.2
Senior Citizens Saving Scheme (SCSS):One can invest in SCSS after attaining the age of 60 years only
However, if an individual has opted for Voluntary Retirement Scheme (VRS), he is eligible to invest in the scheme from the age of 55 years
An individual can invest a maximum amount of Rs 15 lakh, singly or jointly in an SCSS account (in multiples of Rs 1,000)
SCSS offers tax benefits under section 80C of the Income-Tax (I-T) Act
Post Office Monthly Income Scheme (MIS): For the quarter ending December, MIS will provide an interest rate of 7.7 per cent
It has a maturity period of five years with the maximum investable amount of Rs 4.5 lakh in a single account and Rs 9 lakh in case of a
However, the income is subject to taxation.4
Monthly income plans (MIPs): A majority of the portfolio of MIPs is invested in debt funds
Thus, it is a viable option for retired individuals as the returns are secure
People, who want to park their money safely while getting additional income monthly/ quarterly, can opt for MIPs", Brijesh Parnami,
Executive Director and CEO, Essel Wealth Services told TheIndianSubcontinent.5
Investing in equity: Individuals planning for retirement can also invest in equity
"One can either invest directly in equity or via mutual fund
It is advisable for first-time investors or even small investors to invest via mutual fund
Now, the percentage of allocation to equity mutual funds is totally dependent on an individual's risk profile
However, one can consider investing about 20-25 per cent of the retirement corpus in equity mutual funds," said Pradeep Agarwal, CEO, Meri
Punji IMF Private Limited.6
Mutual Funds: Mutual funds are one of the best options as the fund is managed by experts, who have knowledge about the equity markets
"One flexible way to create a steady flow (of income) is through SWP (Systematic Withdrawal Plans) from a mutual fund which ensures growth
of a portfolio over the investment duration as well as a desired outflow each month
Equity mutual funds also have the ability to generate higher inflation-adjusted returns over a long-term", Dinesh Rohira, Founder and CEO,
5nance.com, told TheIndianSubcontinent
SWP allows you to withdraw a fixed amount from investment at regular time intervals
It is the reverse of Systematic Investment Plans (SIPs), under which you can invest a small amount of money regularly, instead of a lump
Public Provident Fund:PPF offers an EEE (Exempt-Exempt-Exempt) tax status
The maturity amount and the overall interest earned during the period of investment are tax-free
It has a lock-in period of 15 years.8
Tax-free bonds: There are many tax-free bonds available in the market which can be a part of a retiree's portfolio because they offer
guaranteed tax-free returns over a long term
"Tax-free bonds are best for senior citizens in the higher income tax bracket
Such bonds offer clarity and assured income if planned well," said Anil Rego, Founder and CEO, Right Horizons
However, some experts feel that liquidity issues make them less attractive
"Tax-free bonds generally have a longer lock-in and in the absence of an active secondary market, liquidity is a problem if the funds are
needed in case of any emergency
So, it is not a very good investment, "said Vijay Kuppa, Co- Founder, Orowealth.9
National Pension System: NPS, introduced by the government, allows individuals to contribute towards building a pension corpus throughout
At the time of retirement, NPS subscribers can withdraw up to 60 per cent of corpus in lump sum, while the remaining 40 per cent of corpus
There is an additional tax benefit up to Rs 50,000 for investment in NPS.10
Annuity plans: Annuity plans are long-term contracts that are tax-deferred
These plans offer regular payments in exchange for a lump-sum investment
According to Brijesh Parnami, Executive Director and CEO, Essel Wealth Services, there are two types of annuity plans - deferred annuity
plans and immediate annuity plans
In deferred annuity plans, the investment can be made either one-time or at regular periodical intervals, and the pension begins after the
premium payment term or after maturity
In immediate annuity plans, the investment is made in lump sum and the pension begins immediately
The pension amount is based on the amount invested by the investor.
