Income from investments is the major source of income for people who have retired. Different investment options are available in the market to help you build an ideal retirement portfolio.
Retirement investment options offered by life insurance companies are combination products offering the benefits of both insurance and investment. To build a retiree portfolio with a mix of fixed income and market-linked investments is often a challenge for retirees.
There are many senior citizen investment scheme offered by Banks & NBFCs. Some of them are as given below:
Here are some investment options for senior citizens.
Senior Citizens’ Saving Scheme (SCSS) is the first choice when it comes to retirement investment options. Only senior citizens can invest in this scheme.
SCSS can be availed from a bank or post office. This scheme has a tenure of five years and can be renewed for another three years after the maturity of the scheme. SCSS can also be availed by early retirees only if they invest their retirement funds within a month of receipt.
Investment in SCSS is eligible for tax benefits under Section 80C and offers the highest post-tax returns as compared to other fixed income taxable products.
Retirees can also invest in tax-free bonds. As the name suggests, the interest from these bonds is tax-free. So there is no tax deducted at source.
These bonds are long-term investments and mature after 10,15,20 years. So you should buy them only if you are sure that you will not require the money invested in them for a long period of time.
An annuity is a combination of insurance and investment and can be used as a retirement investment option.
If you invest in an annuity, you get an annual income for the rest of your life. There is no annual contribution limit in annuities as in some other investment options.
But the income from annuities is taxable and is very low, making them a less favourable option.
Post Office offers POMIS under the purview of the finance ministry. The investment period is five years. You can invest up to Rs.4.5 lakh individually or Rs.9 lakh jointly. You can reinvest your money after maturity in the same scheme again for another 5 years.
Since it is a government-backed scheme, it is reliable. Though the returns are not very high but yet they are higher than income from fixed deposits. The income is subject to taxation even if it is a post office investment.
Retirees can invest both in Debt Mutual funds and Equity Mutual Funds to get stable returns.
Equity mutual funds can generate steady income but you should stay away from small and mid-cap funds.
Income from Debt funds gets taxed after an indexation of 20 percent. You can invest in debt funds because of their liquidity and taxation benefit.
Fixed Deposits(FDs) with banks is a reliable investment option. It is safe and provides fixed returns. Although the rate of interest has been falling in the recent years, yet senior citizens are offered an increased rate by most of the banks.
FDs provide flexibility in terms of tenure. You can also spread your investment in a number of FDs for different amounts and different lock-in period.
An investment made in five-year tax saver fixed deposit is exempted from tax under Section 80C of Income Tax Act. But the interest income is taxable even in this case.
National Savings Certificate (NSC) is a Savings Bond issued by post office under the purview of Indian Government.
There is no limit on the amount of investment and the income is exempted from taxation.
These certificates have a tenure of five and ten years and can be used as collateral security while availing loan from banks.
The Bottom Line
So now that you know about some of the best retirement investment options, you should start planning to build an ideal portfolio for your retirement. You can also take a look at pre-approved offers on home loans, Personal Loans, instant Small Business Loans and more by NBFCs. Simply enter your details and check your pre-approved offer.