After retirement, it’s important to invest your pension money wisely so that it generates regular income while also keeping your capital safe. With rising inflation and longer life spans, relying only on bank FDs may not be enough. Senior citizens need to create a mix of guaranteed and market-linked options that offer better returns without exposing them to high risk.
Use SCSS and PMVVY for guaranteed income
Senior Citizens' Savings Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY) are government-backed plans with returns between 7.4% and 8.3%. They are safe, regulated, and offer quarterly or monthly fixed returns. SCSS has a lock-in of five years and a cap of ₹30 lakh, while PMVVY offers pension for 10 years. Both can be employed to build a sturdy income base.
Invest in corporate bonds and debt mutual funds
For returns more than bank FDs, retirees can park their money in short-term debt mutual funds or AAA-rated corporate bonds. These have slightly higher returns (6-8%) with relatively low risk when held for mid-term. They are less risky than equity funds and taxed at slab rate if holding period is less than 3 years. Carefully select a good fund or bond issuing company to protect your capital.
Try out monthly income schemes for regular payments
Monthly Income Plans (MIPs) of fund houses invest directly in debt with exposure to equities. They are designed to provide monthly returns and are good for retirees who want regular returns, along with growth. Gains may fluctuate slightly, but a good MIP can provide 7-9% per annum return, depending on the market. They are reasonable from a tax standpoint compared to normal FD interest in the long run.
Invest part of the corpus in annuities for whole life coverage
If you are concerned about spending more than what is saved, you can invest a portion of your pension into life annuity plans of insurance companies. These provide fixed monthly or quarterly income lifelong, even return of premium to nominee at times. Returns are lower (about 6%), but they ensure security of life and can be combined with other investments having high returns.
Keep some amount liquid and tax-efficient
It is always wise to keep some of the pension amount in liquid deposits, sweep-in FDs, or post office MIS as a safeguard. Also, take advantage of Section 80TTB and enjoy tax relief up to ₹50,000 on interest income. Withdraw money judiciously to get maximum returns and stagger withdrawals over tax slabs. Don't invest the whole pension corpus in one product—diversification is the key to tension-free retirement.
FAQs
Q. Is SCSS interest taxable?
Yes, the interest income is charged at full slab rate, though you can avail of the investment under Section 80C.
Q. Can I invest in mutual funds post-60?
Yes. There is no age restriction to this kind of investment, and you can invest in debt or balanced mutual funds according to your risk profile.
Q. Do I need to invest in shares post-retirement?
Investing big amount should not be done if you have no experience. Investing marginal amount in equity through balanced funds is secure.
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