Where to Put Your Retirement Income?

You are now free from the 9 to 5 schedule, and have time for yourself. So take the bucket list out of the closet or prepare to drown yourself in that hobby you have always wanted to peruse.

Your provident fund corpus is looking good, and if you are entitled to receive a pension, that will be extra support. But you don’t want to spend your time worrying about where to put your funds. In this article, we shall look at options where you can invest for your retirement corpus.

Equity/equity mutual funds
Exposure to stocks after retirement might sound risky, but to fight the rate of inflation, it is a good idea to invest some portion of your retirement corpus in stocks. Stocks and equity mutual funds are tax-free, only if you invest for a long time. A 15% tax is levied on the interest when you sell your holdings within a year. But, considering the long term returns, it is a good option to look at.

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Fixed Deposit
Usually, we tend to move towards FDs post-retirement. Banks offer higher interest rates for senior citizens and it is one of the safest investment tools. The quarterly or monthly interest earned is fixed, and the income from FDs is predictable without any market dependency. But, tax is a part of FD, so if you are earning Rs. 5000 or above from your FD, 10% TDS is levied on the interest. Note: If PAN is not presented, in such cases, the TDS deduction rate is 20%.

Liquid Funds
From a tax perspective, a liquid fund is a better option. The money is invested in government bonds, high credit companies, treasury bills, and commercial papers. As per SEBI, these funds can only be invested in debts for a short period of time.

The return is as per the market rate, but prices for short term securities see less change than long term bonds, so liquid funds are stable. Also, there is no lock-in period, and you are free to withdraw your money any time you need it.

Senior Citizens’ Savings Scheme (SCSS)
SCSS is offered by the government of India, for senior citizens to avail regular income after retirement. It is safe to invest in SCSS and you also get tax benefits. The rate of interest offered is 7.4% and the tenure for which the money is deposited is 5 years. You can deposit a maximum of Rs 15 lakh. You can also apply for premature withdrawals, if required. One added benefit of SCSS is that an individual can open more than one account, both jointly and individually.

Annuity Plan
It is good to have an annuity product as a part of your retirement portfolio. An annuity plan is a long term investment, where you deposit a lump sum. In return, the insurance company disburses periodic income against the deposited amount. In the case of death, the annuity returns are transferred to the nominee.

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Types of annuity:

Immediate:
Payouts are immediate, and the time difference between the time the depositor deposits premiums and earns payouts is marginal.

Deferred:
Is the inverse of immediate, with a significant time difference between the accumulation and payout phases.

Final thoughts
A retirement portfolio is a must considering inflation and market turmoil. In the end, choose a plan that justifies your cause and serves your requirements.