Your Money: Seven assured cash flow options for your golden years

The common charge of return is 8-10% within the final decade. This scheme gives further tax deduction as much as Rs 50,000 beneath Part 80CCD(1B).

By A P Singh

Retirement is the onset of a brand new life freed from obligations and filled with freedom. However to get pleasure from the great thing about this new part of life and stay it totally, one ought to be financially free. And that is doable solely when the hard-accumulated lifetime financial savings are put right into a well-balanced portfolio that’s diversified throughout asset lessons in the suitable proportion relying on the monetary targets.

Whereas being obese on one asset class places one in danger, being underweight on one other could make a chance loss. It’s required to know the risk-reward components related to every asset class and construct a portfolio, evaluation it at periodic intervals and make mandatory modifications as and when required.

The necessities of a post-retirement life could be to make sure a month-to-month money circulate and guarantee annual increment to the month-to-month money circulate to deal with inflation.

Main choices obtainable

Pradhan Mantri Vaya Vandana Yojana: It’s a retirement-cum-pension scheme for senior residents with no most age restrict. This scheme gives an assured charge of return of 8% for 10 years. This scheme is an efficient possibility for individuals who wish to get assured returns.

Senior Residents Financial savings Scheme: A government-backed scheme, it gives a low-risk, regular stream of revenue to the aged together with tax advantages. Retirees can make investments as much as `15 lakh individually or collectively. It’s obtainable throughout all banks and postal places of work. An rate of interest of seven.4% is payable for the April-June quarter within the scheme. SCSS is best by way of liquidity owing to a decrease maturity interval of 5 years. Additionally, cash may be withdrawn prematurely from the SCSS account by paying a penalty.

RBI taxable bonds: These are sovereign bonds having negligible danger. Presently, the return supplied is 7.15% floating. These are taxable bonds with a maturity interval of seven years.

FDs from banks, NBFCs, corporates: As fastened deposits for senior residents have increased charges with assured returns, they continue to be the popular funding choices for them. Presently, the very best senior citizen fastened deposit charge is 7.75% supplied by Sarvodaya Small Finance Financial institution for a interval of 5 years.

Annuity plans by life insurers: Annuity plans obtainable from insurance coverage corporations embody quick and deferred annuity plans. Whereas quick annuity begins paying annuity instantly after the lump sum quantity is paid to the insurance coverage firm, deferred annuity pays the annuity on the deferred date as required by the annuitant.

Public Provident Fund: It may be opened by any Indian citizen for a tenure of 15 years.

This scheme is beneficial for retirees as it may be prolonged indefinitely past 15 years for a block of 5 years. This extension may be with or with out recent contributions. The common charge of return is best than the fastened deposits and it really works on the EEE precept, i.e., no tax is payable on the time of funding, charge of return and on the time of withdrawal.

Nationwide Pension System: The scheme permits subscribers to contribute recurrently to a pension account throughout their working life. On retirement, subscribers can withdraw 60% of the tax-free corpus and use the remaining 40% corpus to purchase an annuity to safe a daily revenue after retirement. The common charge of return is 8-10% within the final decade. This scheme gives further tax deduction as much as Rs 50,000 beneath Part 80CCD(1B).

The author is director, Amity Faculty of Insurance coverage, Banking & Actuarial Sciences