A well-balanced portfolio of post retirement investments may not only offer a reliable source of income but also guarantee the preservation of the principal.
An individual who has been employed for a number of decades anticipates getting retirement benefits upon leaving the workforce. These benefits normally comprise a provident fund amount, gratuity, and many additional superannuation funds.
These assets for retirement need to be invested in such a manner that they contribute toward meeting the criteria for a stable income throughout the last years of a person’s life. Consequently, a prudent combination of post-retirement investments is what one should concentrate on in order to not only generate a monthly income but also guarantee the safety and liquidity of money, in addition to reducing the amount of tax burden that is owed.
For seniors looking to diversify their retirement portfolio, here are a few investing possibilities:
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Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a one-time lumpsum investment scheme for 10 years that is made available exclusively through the Life Insurance Corporation of India (LIC). The scheme provides participants with the option to receive a regular retirement income in the form of a pension on a monthly, quarterly, half-yearly, or annual basis.
Anyone older than 60 years old is eligible to deposit a maximum of Rs. 15 lakh (or Rs. 30 lakh along with a spouse) in the PMVVY programme. In the fiscal year 22-23, the PMVVY will guarantee a pension of 7.40 percent on an annual basis, which will be paid out monthly. This guaranteed rate of pension will be paid out for the whole of the policy term, which is ten years, for all of the policies that are acquired up to March 31, 2023.
Senior Citizens Saving Scheme (SCSS)
The Senior Citizens’ Saving Plan (SCSS) has a five-year lifespan that, after the scheme has reached its full potential, has the potential to be extended for an additional three years. It is possible to register several SCSS accounts, however the total amount that may be invested across all of your accounts is capped at 15 lakh rupees.
At this time, the interest rate is 7.4 percent per year, and it is completely taxed, in addition to being payed quarterly. Investing in the SCSS may qualify for tax breaks under Section 80C, and although the programme does permit premature withdrawals, such withdrawals result in the loss of any tax advantages previously gained.
Floating Rate Savings Bond
There is a maturity period of seven years attached to the Floating Rate Savings Bond, 2020 (Taxable). On January 1 and July 1 of each year, interest is sent to the account holder. The interest rate on Floating Rate Savings Bonds is the same as the interest rate on NSC + 0.35 percent. This means that the two rates are equivalent.
The interest rate will continue to fluctuate during the duration of the programme based on the interest rate of NSC investments. The maximum amount that may be invested in Floating Rate Savings Bonds is not predetermined.
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Post Office Monthly Income Scheme (POMIS) Account
POMIS is an investment opportunity that lasts for five years and has a maximum limit of Rs. 9 lakh when held jointly and Rs. 4.5 lakh when held individually. The annual percentage rate of interest, which is presently fixed at 6.6 percent and accrued monthly, is determined once every three months.
The annual percentage rate of interest does not change throughout any part of the term. It is possible for the interest generated via POMIS to be credited to a post office savings account, and it is also possible to submit a mandate for the monies to be transferred to recurring deposits within the same post office.
Bank fixed deposits (FDs)
The interest rates on bank fixed deposits (FD) are now at 6.5 percent and are expected to increase in the near future. In light of this, one strategy for mitigating’re-investment risk’ is known as ‘laddering,’ which entails distributing money over many maturities rather than locking them up for a certain length of time. When the fixed deposit with the shortest term reaches its maturity date, you should renew it for the maximum length possible. Continue this procedure when further fixed deposits reach their maturity dates.
The deposits of senior people earn an extra interest rate of 0.5 percent per year, while many banks provide Special Deposits that pay much greater interest rates on certain terms of the deposit’s duration. The five-year tax saving bank FD can be an option worth considering for retirees who are also interested in minimising their tax liability.
Living on a Government Retirement pension
An investment in the Pradhan Mantri Vaya Vandana Yojana made in the financial year 22–23 guarantees a retirement pension payment of 7.4 percent on an annual basis throughout the whole policy period of ten years.
The interest rate on a Floating Rate Savings Bond is equivalent to the interest rate on a National Savings Certificate (NSC) + 0.35 percent.
Those who put money into the Senior Citizens Savings retirement Scheme may be eligible for tax breaks under Section 80C.
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