The first obvious thing that happens after you retire is that your salary stops! And your dependency on other source of funds such as provident funds, gratuity, PPF, insurance policies, and any other retirement savings or investments (if any), increases.

Yes, it sounds scary, but is that something you should be worrying or stressing over? No, not even a bit! All you need is good planning.

Here’s how you should go about it! Before you set out to begin enjoying your post retirement life, the first thing you should do is – clear off all your debts. Since there is no salary coming in then, these debts won't help you much in saving on taxes. And considering the fact that the interest rate of your loans will be higher than the interest rate you earn on your investments, these debts could end up being a burden. Some of the future expenses that are likely to chew up a large portion of your retirement corpus could include a foreign trip or domestic vacations; children’s higher education, career and marriage; etc. This is apart from your regular monthly expenses, of course.

Therefore, it's very essential that you make sure there is a regular flow of income of some kind, and there is also liquidity of funds, some emergency funds and more importantly, regular growth of your corpus.


Here's a list of ways to use and invest the money you get on retirement:

1. Bank Fixed Deposits - Good Returns plus Assurance

Bank FDs also offer you the opportunity of parking your funds for a respectable interest rate that is at par with the industry standards. If you opt for monthly or quarterly payouts, it also offers you the benefit of liquidity. You can choose to receive interest on a regular basis, or keep it invested till maturity. Either ways, the rate of interest offered will remain anything between 4.90% and 7.50%, and will vary for every bank. Bank FDs are available for a term ranging from 7 days to 5 years. What’s more, in case of an emergency, you can also take a loan of up to 90% of your total deposit amount (principal + accrued interest). Other deposit options available include Recurring Deposit, Tax Saving FD, Regular FD, Senior Citizen FD etc.

2. Post Office Monthly Income Scheme (POMIS)- Old is Gold

The USP of POMIS is that it offers a guaranteed monthly income. As an individual, you can deposit up to Rs. 450,000, while in a joint account, you can deposit up to Rs. 900,000, and get yourself a fixed monthly interest @ 7.80%. Just like SCSS, this scheme too comes with a lock-in period of 5 years. The best part about POMIS is that you can add an auto-draw facility to receive the interest amount in your savings account, and use this interest component, as per need, as your monthly income.

In addition, when you are short on money and need funds urgently, you can extract your investment for a minor penalty charge (withdrawal eligible only after one year). The charge applicable for withdrawal made within three years is 2%, which drops to 1% as soon as you complete three years.

3. Mutual Funds - Risk & Returns

Mutual Funds are comparatively riskier than the other options above, and are suitable for ones who wish to earn higher returns by investing in diversified investments, even if it means taking on some monetary risks. There are various types of MFs available in the market like Equity Funds, Sector Funds, Diversified Funds, Index Funds, Debt Funds, Gilt Funds, Balanced Funds, ETFs and more. You can speak to a relationship manager to understand Mutual Funds better. Based on your goals and risk appetite, Mutual Funds give you a variety of options to invest your money in. Diversifying your investments helps reduce your portfolio risk.

Mutual Funds are managed on a day-to-day basis by professional portfolio managers, who decide when to buy and sell stocks / bonds, according to the investment objectives of the fund. Instead of fixed interest rates, MFs offer NAV (Net Asset Value), which is calculated by taking the current market value of the fund's net assets and dividing it by the number of outstanding shares. For example: if a fund has total net assets of $100 million and there are one million shares of the fund, then the NAV is $100 per share.

Although MFs don't give you a monthly income, what makes it a lucrative investment is that over time, you could take home a higher value compared to other investment options. For urgent needs, you can also withdraw your money anytime by paying an exit fee if withdrawn within a stipulated period.

4. Tax Saving/Tax Free bonds: Acting responsibly 

Tax saving/Tax free bonds are those individual tax saving instruments for investors who prefer low risk and seek to preserve their income in the longer run. They carry a rate of interest which are comparatively lesser than other bonds, but are secured, redeemable and non-convertible in nature. Moreover, these bonds have a fixed tenure from minimum 5 years to as long as 20 years. If you belong to the higher income slab paying 30.9% tax, then investing on such bonds totally suits you. An investor can start with a minimum of Rs. 10,000/- per bond.

Here are a few options you can get started with:

  • National Highway Authority of India Bonds: Start investing on NHAI bonds and be an active individual who is responsible for the development, maintenance as well as management of National Highways. The interest you earn here will be credited to your account directly.

  • Rural Electrification Corp Bonds: These are Capital Gained exempted bonds with an objective to finance and promote rural electrifications projects across the nation. Specifically, you provide financial support to empower the rural India and as a result get exempted from tax. Since infrastructure is a growing sector, this can be an attractive investment for you.

  • Indian Renewable Energy Development Agency Ltd: IREDA is a Public Limited Government Company constantly which focuses on developing, promoting, as well as financing specific projects and schemes for generating new and renewal sources of energy. 

5. Real Estate - The Big Play

Real Estate is considered to be one of the big investment options with great potential for returns, and it is pretty common for expert investors to invest in this sector. And that's mainly for two reasons – first, because of the tangible nature of the investment; and the second, the pricing, as it almost always pays back in the longer run.

Identifying good properties is the key challenge here — you must know how to evaluate the yield of a real estate property. If you invest in the right one, it can provide you maximum returns at minimum risk.
Assuming you already have a house, here’s what you can do: purchase a residential / commercial (shop, showroom, ATM space, office space, etc) place. This can get you a monthly rental, that increases with time. The property rates too will grow with time. This property can be passed on to the next generation or sold at a higher price.

To summarise, here's how you can about:

  • Set aside sufficient funds for your loans/debts/holiday (if any)
  • Next, invest a decent portion in the combination of SCSS, FDs and POMIS. These will help you get a monthly income to manage your regular expenses, while also blocking your money for the emergency days.
  • Invest a portion of surplus money in MFs. This can earn you handsome returns and give you the benefits of a diversified portfolio.
  • If you still have sufficient capital left, or you wish to skip any or all of the above options, then real estate a great option.


    Retired life is said to be the golden period of our lives, and discipline in money management can help us lead it like one!

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.