Investment: Retired people who want passive income can consider these investments.
For many, retirement means that they have passed the age of earning money if they do not choose to work as an advisor, freelancer and teacher. It is important for retired people to use their retirement assets in such a way that they get a regular income and also have less tax burden on them. However, for many senior citizens, building a retirement portfolio with a combination of fixed income and market-linked investments is a challenge. The ideal situation is that one’s retirement money should last as long as one is alive – a person retires at the age of 50 or 60, while the life expectancy can be up to 80 years.
Retired people who want a passive income can consider these investments. And you can place these investments in your retirement portfolio.
income from rent
The demand for homes is increasing, mainly due to India’s growing population and increasing spending capacity. This trade indicates that you can make another source of income by renting out a commercial or housing property. However, to do so, you need to invest in places that start with high demand and high prices.
Senior Citizen Saving Scheme
Senior Citizen Saving Scheme (SCSS), which is the first option of most senior citizens, is a must have in their financial portfolio. As its name suggests, this program is limited to elderly senior citizens and recent retirees. SCSS is available to anyone above 60 years of age through post office or bank. Recently retired individuals can invest in SCSS after getting their retirement fund, provided within three months of receiving the fund. SCSS has a tenure of five years which can be extended for another three years after the maturity of the scheme. Currently, it is offering an interest rate of 7.4% per annum.
fixed deposit
The saying of Old Is Gold on Fixed Deposit fits well. It is never out of fashion. A plus point for retirees is that FDs come with guaranteed interest rates, which keeps them away from the volatility of investing in equities.
Monthly Income Scheme (MIS)
Post Office Monthly Income Scheme is one of those schemes where you can invest a specific amount and in return receive a fixed interest amount every month. Individuals can contribute up to Rs 4.5 lakh, and in a joint, you can invest up to Rs 9 lakh over a period of five years. The purpose of this scheme is to save the capital.
equity
When one retires, his/her non-earnings cycle lasts for about two decades or more, so it becomes necessary to put a part of the retirement assets in equity-linked products. Remember that retirement income (interest, dividend) is vulnerable to inflation, even during the retired phase. As per the study, equities generate better inflation-adjusted returns than other assets.
Depending on one’s risk appetite, a specific percentage of assets can be allocated to Equity Mutual Funds (MFs), which have additional diversification through large-cap and balanced funds.
Monthly income plans may also include some equity exposure (MIP). Retirees are advised to avoid sectoral and themed funds as well as mid-cap and small-cap stocks. The objective is to achieve consistent returns instead of focusing exclusively on high but uncertain returns.
It is important to note that exposure to equities depends on the risk profile of the investor and his time horizon. If there is a possibility that one may need these funds before 3-5 years, then it is better to stay away from equities.
