Retirement planning is a part of financial planning that ensures well-being and independence after retirement, regardless of an individual’s current employment status. A personalized retirement plan helps pave the way for an individual’s financial independence and overall security leading to a comfortable life post retirement. However, the success of such a plan depends largely on the choice of investment plans and their scope. That said, let’s explore multiple investment options that are deemed to be the best retirement plan in India and can help them build a corpus for their retired life.
Best Investment Plans for Retired Individuals
When planning retirement, investors must tailor their investment choices in a way that aligns with their financial goals. However, the goal for retirees may vary. For instance, some retirees may prioritize generating a stream of income, while others may wish for wealth accumulation by investing in the best retirement plan in India. Investors who are clear about their goals and their approach can achieve their objectives over time. For instance, those willing to generate a regular income source may emphasize generating additional income sources. They might invest in mutual funds to generate wealth and build a corpus. Alternatively, those who do not anticipate a pension might restructure their current investment profile to generate an income flow.
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Best Investment Plans for Growth
Senior citizens have several investment options available today, enabling them to accumulate wealth, build an investment portfolio, and mobilize savings. This approach helps them achieve their financial goals over time, playing a key role in allowing retirees to generate inflation-adjusted returns. In addition, it helps wealth accumulation and corpus building over time.
Mutual funds have become one of the most preferred means for wealth creation and mobilizing savings for long-term growth. These market instruments are known to deliver substantially high and inflation-adjusted returns. If this was not enough mutual funds also extend attractive tax deductions to investors, including deductions of a maximum of Rs. 1.5 lakh under Section 80C of the Indian Income Tax Act for tax-saving schemes like Equity Linked Savings Schemes. Individuals can use an investment calculator to provide users valuable insight into estimated returns and develop strategies suited to their specific needs. However, it should be noted that mutual funds come with significant market risks as their performance depends on market volatility.
This makes it important to select a mutual fund based on one’s risk-taking capacity. They should also consider having a balanced approach towards their investments to spread out the accompanying risks and ensure a smooth flow of returns over time.
National Pension System
The National Pension Scheme is designed for Indian citizens who are in the age group of 18 and 65, to help them plan their retirement. The scheme provides its subscribers with active and auto-choice investment options. In the case of an active option, the individuals have control over their investment contributions, allocating them across corporate and government securities, and equities. On the other hand, the auto-choice option determines the suitable asset allocation for the investor automatically based on their age to ensure a balanced approach towards investment. It should be noted that senior citizens have the option to extend their NPS till they turn 70.
NPS account holders are also entitled to tax-saving benefits, where they can claim a tax deduction of a maximum of Rs. 1.5 lakhs in a given year under Section 80C. In addition, Section 80CCD entitles individuals to an additional deduction of a maximum of Rs. 50,000. Notably, the National Pension Scheme is not guaranteed to extend any fixed returns but can help investors generate returns in the long run by investing resources in equity-oriented funds. However, investment in equity funds is capped at a fixed 75% of its portfolio.
Investment Plans to Generate Monthly Income
Senior citizens can invest in these options to generate a monthly income –
Senior Citizen Savings Scheme
The Senior Citizen Savings Scheme is a lucrative investment instrument designed for senior citizens, especially those looking to generate a blend of returns and financial security. Notably, SCSS interest rates are relatively higher than traditional options, such as fixed deposits or regular savings plans. Also, senior citizens have the option to claim tax benefits of a maximum of Rs. 1.5 lakh yearly under Section 80C. However, to create an SCSS account, applicants must be at least 60 years of age. Also, the initial investment amount is capped at Rs. 15 lakh and comes with a maturity period of five years. However, individuals can extend the account period by another 3 years. They are also asked to add a nominee to their account, who will receive the proceeds of the scheme as its beneficiary. Individuals can readily open an SCSS account at their nearest post office or banking institution.
Post Office Monthly Income Scheme
This scheme is a lucrative option for retired individuals to mobilize their savings for a regular stream of income. The scheme pays monthly income and extends tax deductions on their deposits annually for up to an amount of Rs. 1.5 lakh. Notably, the interest accrued through the POMIS is liable for taxation. POMIS comes with a maturity of five years, allowing individuals to mobilize a significant amount of their savings.
Fixed Deposits and Recurring Deposits
Fixed deposits and recurring deposits are among the most popular savings schemes for senior citizens. These savings instruments are known to yield higher interest than other conventional savings accounts. Since they are not market-linked instruments they help protect individuals’ capital from market fluctuations. In addition, senior citizens are likely to get higher interest rates on their FD and RD accounts. Notably, they are also eligible for tax benefits. For instance, Section 80TTB of the Indian Income Tax Act allows individuals to claim exemptions of up to Rs. 50,000 on their investments. These features make both fixed deposits and recurring deposits lucrative for retirees.
By putting money into more than one of these investment options along with a robust life insurance term plan, individuals can build a robust retirement corpus and spread associated risks. However, it is recommended to check the features of the best retirement plans in India to understand their scope and application.