7 Ways to Invest Retirement Money in India
Every individual worries about their retirement planning. At the retirement stage all financial goals would have been achieved. Income has stopped and expenses have inflated. Retirement corpus is received from various sources like Provident Fund, Gratuity, PPF and insurance policies matured. But one question remains in mind is where to invest such retirement money? Are there any best ways to invest such retirement money in India? In this article we would focus on the top and safe ways to invest the retirement money in India.
Best Ways to Invest Retirement Money in India
#1 Senior Citizens Saving Scheme (SCSS)
Government has introduced this Senior Citizens Savings Scheme for retired employees. Almost all nationalized banks are offering this SCSS scheme. Below are the features of this scheme.
- Minimum investment: Rs 1,000
- Maximum investment: Rs 15 lakhs
- Current interest rate: 9.3% p.a.
- Age of entry: 60 years. However in case an individual retired by 55 years of age through voluntary retirement scheme (VRS), they can opt for it.
- Tenure: 5 years lock-in period which is extendable for another 3 years.
- Tax exemption: Eligible for tax deduction under 80C
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# 2 Post office Monthly Income Scheme (POMIS)
As the name suggestions this is the monthly income scheme from post office of India. Post offices run by government of India, hence it would be a safe option to invest the retirement corpus. Below are the features of the scheme.
- Minimum investment: Rs 1,000
- Maximum investment: Rs 4.5 lakhs – Single account and Rs 9 lakhs for joint account
- Current interest rate: 8% p.a. and 5% payable on maturity. The effective yield would be 8.9% p.a.
- Tenure: 5 years
# 3 Post office Term Deposit (POTD)
This is similar to any other bank fixed deposit, but issued by Post office of India. Below are the features of this scheme.
- Minimum investment: Rs 200 and in multiples of Rs 200 thereon
- Maximum investment: No limit
- Tenure and interest
- 1 year-8.2%
- 2 year-8.3%
- 3 years-8.4%
- 5 years-8.5%
- Interest is compounded quarterly.
- Tax exemption: 5 years POTD is eligible for tax deduction under 80C
# 4 Annuity / Pension plans
The annuity /pension plans are offered by Life Insurance Corporation of India. Monthly payouts done by insurance company from the corpus invested. Generally the returns would be from 6.5% p.a. onwards. The annuity value depends on annuity investment, age and rate of interest. Age of entry: 40 years to 100 years. There are various types of annuity plans.
- Life time annuity payment, without return of purchase price. This ceases on death of annuitant.
- Life time annuity payment, with return of purchase price. The purchase price is paid to nominee on death of annuitant.
- Annuity guaranteed for specific number of years.
- Joint life annuity: Annuity is paid to spouse, in case of death of annuitant. It continues till spouse survives.
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#5 Monthly Income plan in mutual funds
This is another good option to invest retirement corpus. MIP’s invest in debt and equity related instruments.
- The objective of MIP’s is to generate regular periodical returns through dividend payouts.
- MIP returns can be higher than bank fixed deposits as they invest up to 15% of their portfolio in equity.
- These are tax efficient investment options as they are treated like debt funds for long term capital gains taxation. The tax would be either 10% without indexation or 20% with indexation.
#6 Fixed Maturity Plans (FMP) in mutual funds
FMP’s are issued by mutual funds for short to medium term.
- These are close ended mutual fund schemes for the period from 6 months to 3 years.
- The returns would be higher compared to bank fixed deposits.
- They cannot be redeemed like any other mutual funds. However they are listed in stock exchanges and they can be purchased or sold.
- Even for FMP’s the long term capital gains taxation would be similar like debt mutual funds i.e. 10% without indexation or 20% with indexation. FMP’s are generally issued for 370 or 375 days so that an individual can get double indexation benefit. Read this article for more information on double indexation benefit.
#7 Bank fixed deposits
One of the good investment options for retirement corpus saving is, investment in bank fixed deposits.
- Bank FD’s interest rates are around 8% to 9% p.a pre-tax. Senior citizens would get another 0.5% more than these regular rates.
- This investment option is convenient to operate as majority of the seniors would already have a bank account and they are habituated to use bank account.
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Ways to Invest Retirement Money in India
A nation which does not honour its soldiers is bound to be doomed. A few quotes from past.
”So long as I’m Commander-in-Chief, we will sustain the strongest military the world has ever known. When you take off the uniform, we will serve you as well as you’ve served us – because no one who fights for this country should have to fight for a job, or a roof over their head, or the care that they need when they come home.”
Hope our Political Dispensation learns something from this & not indulge in vague rhetoric.
Lt Gen Jasbir Dhaliwal, PVSM, AVSM, VSM (Veteran).
Sir, pension scheme and other scheme are not fully satisfied in future.( a small amount ) Individual pension i.e. online multiple running rd is very much good return. Rs.200/- 10 years RD 8% u get Rs.36724/- (Example minimum 4 or 6 running rd per year after 10 years you have achieved the benefit)
Rs.300/- RD 10 years 8% – 55087/-
After 10 years monthly expenses Rs.62,000 in City People.
Please calculate and further saving.
I have a Jeevan Tarang Policy of 5.0L (Term 15 years, Annual Premium Rs. 34361.00, already Paid Five (5) Premium).
If I surrender now i am getting Rs.1,26,000 amount I enquired at LIC Branch.
Shall I make it Paid up policy and invest the premium amount (Rs. 34361.00) in PPF or shall I continue to pay full term premium.
Dear Mr Suresh,
I am 44 years old army officer, retiring in nov.May I please request you to please recommend hhow I should I invest the lump sum that I will be recieving in a safe but with adequate growth in built.
Sir, Thanks for the very good article. I have recently – after 2014 budget – entered the league of retirees.
1. As the article is an year old, can you update it as per 2014 budget and mail me. It will be helpful for me and many others like me.
2. My aim is to invest my corpus wisely to have a decent monthly income of about Rs.30000 but with tax impact as less as possible.
I need your guidance.