Retirement
A retirement plan is a financial arrangement designed to replace employment income upon retirement. These plans may be set up by employers, insurance companies, trade unions, the government, or other institutions. Congress has expressed a desire to encourage responsible retirement planning by granting favorable tax treatment to a wide variety of plans.
Here are few investment options for the retired to provide for their monthly household expenses. The idea is to build a retiree portfolio with a mix of these products.
Retirement means the end of earning period for many unless one chooses to work as a consultant. For retirees, making the best use of their retirement corpus that would help keep tax liability at bay and provide a regular stream of income is of prime importance. Building a retirement portfolio with a mix of fixed income and market-linked investments remains a big challenge for many retirees. The challenge is not to outlive the retirement funds - one retires at 58 or 60, while the life expectancy could be 80.
The idea is to build a retirement portfolio with a mix of these products. Here are few investment options for the retired to provide for their monthly household expenses.
Senior Citizens' Saving Scheme
Probably the first choice of most retirees, the Senior Citizens' Saving Scheme (SCSS) is a must-have in their investment portfolios. As the name suggests, the scheme is available only to senior citizens or early retirees. SCSS can be availed from a post office or a bank by anyone above 60. Early retirees can invest in SCSS, provided they do so within one month of receiving their retirement funds. SCSS has a five-year tenure, which can be further extended by three years once the scheme matures.
Currently, the interest rate in SCSS is 8.6 percent per annum, payable quarterly, and fully taxable. The rates are set each quarter and linked to the G-sec rates with a spread of 100 basis points. Once invested, the rates remain fixed for the entire tenure. Currently, SCSS offers the highest post-tax returns among all comparable fixed income taxable products. The upper investment limit is Rs 15 lakh and one may open more than one account. The capital invested and the interest payout, which is assured, has a sovereign guarantee. What's more, investment in SCSS is eligible for tax benefits under Section 80C and the scheme also allows premature withdrawals.