If you are a senior citizen, at a stage where financial security is of prime importance, and you want to call it a day to enjoy better parts of life, then read on.
All these years you have worked for money and now it’s time for the money to work for you. This is the stage where you need to fine tune your risk appetite. Now you need to be more conservative and simultaneously earn enough returns which will outweigh the current inflation rate. The first thumb rule is to decide the asset allocation, an ‘Equity:Debt’ exposure of 30:70 is recommended. Thereafter mull over and decide, whether you wish to have a regular income. If you are not a pensioner and want to churn out regular income from your investments, then the following are the preferred options:
If you are a pensioner and don’t rely on regular incomes, then certainly invest in National Savings Certificate and Senior Citizen Savings Scheme. If your PPF is maturing, extend it for another 5 years, 8.1% per annum and tax free is too good to resist. You may also thereafter choose the cumulative options for the tabled schemes.
If you are not hard pressed for regular income but in the top tax slab where straight 33% is shaved off from your interest, then nothing can beat a debt mutual fund. The taxation rule in debt mutual funds is simple, if you invest for a period of 3 years, you shall avail indexation benefit where the net tax on gains would not be higher than 3%. In short you save around 30% in tax which translates to earning 30% higher returns as compared to any fixed deposit. Debt funds have on an average over a period of 10 years delivered around 9% per annum, post-tax. FMP’s (fixed Maturity plans), Monthly Income Plans are the popular kinds. Please ensure the options are Growth and not dividend to avail indexation benefit, in case you choose dividend option in a debt scheme then the dividend distribution tax will be around 30% which will drastically subdue the returns.
Retirement means a time for a new adventure. So invest wisely and go all out for the new innings!!
‘Ethix’ is open to answering any relevant queries on handling your finances.
Mail him at: mehran@ethix.net.in
or visit his website on www.ethix.net.in
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