Retirement means the end of earning amount for several, unless one chooses to work as a adviser. For retirees, creating the best use of their retirement corpus that will help keep tax liability cornered and supply a regular stream of income is of prime importance. Building a retirement portfolio with a combination of fixed income and market-linked investments remains a giant challenge for many retirees. The challenge isn’t to survive the retirement funds – one retires at 58 or 60, whereas the life expectancy could be 80.
What are the Retirement Plans?
Retirement plans are the crucial aspects for every individual which also consider the rising level of inflation and the limits of social security initiatives for the senior citizens. The retirement plans offer the dual benefits of investment and insurance as well. Hence, it is better to plan your investment for the retirement age as early as possible because this will ensure you a steady flow of your pensions from the funds you invested in, after your retirement period. If one starts the contribution early for their retirement plans then the funds will ensure financial security for the rest of your life. A better retirement plan can surely help to raise you above inflation and to achieve your financial goals with your basic needs.
Investment Plans for Retired Persons
Nowadays, the interest rate of fixed deposits is almost low. In this situation, if you want better returns with 100% capital protection without taking any risk, then you must choose the equity investment. Whenever one does investment, the risks are also associated with it.
There are usually two types of risks associated with the investments one is known Risk and the other is Unknown Risk. The known risk are those in which you have an idea about the risk you might face in the investment but in Unknown risk, you don’t have any idea about the risks you might face in investment. Here, we are going to explain about the investment strategy to invest your money in double-digit returns which provides 100% protection to your capital income and you invest without any certain or uncertain risks. This article is regarding those people who have the lump-sum amount but are always worried or conservative about their money whether the returns go up or down doesn’t matter for them but, they want their lump-sum to be fixed at the same amount. These kinds of people are usually Senior Citizens or Retired.
Best Investment Plans for Retired Persons
The top investment plans for retired persons are explained below with all details and important features and information. Let’s have a look at these investment plans:
Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme is the best scheme chosen by every retired person. It runs under the government banks which provides a fixed interest rate. The interest you will gain is received quarterly that is, after every 3 months. The interest rate in this scheme may go up and down according to the condition of the market value. If you are a senior citizen and searching for the guaranteed and best returns with government securities then, the senior citizen saving scheme is the best option for you. You can start your investment in the multiple of Rs.1000 up to Rs.15 lacs in this scheme. To start this scheme, you have to put some money as a lump-sum amount to get your quarterly income and the lump-sum money will remain constant until the period of your investment’s maturity which is of 5 years.
Benefits of Senior Citizen Savings Scheme
Following are the advantages of the Senior Citizen Savings Scheme:
- The interest rate of this scheme is generally high rather than other bank’s FD.
- It will also provide you government safety of your money.
- This scheme will assure you the regular income for 5 years.
- The extension facility is also provided in this scheme with the new rate of interest.
- The minimum amount of investment in this scheme is Rs.1000 to Rs.15 lacks only. One cannot exceed the investment amount of Rs.15 lacs in this scheme.
Who can invest in this scheme?
As it is all clear from the name of this scheme that this scheme is valid for the person of the minimum age of 55 years or above and if you are being retired from Defence Service at the age of 50 years then also you can invest in this scheme.
How to open an account in Senior Citizen Savings Scheme?
As this scheme is generally a post office or bank scheme, therefore, you can visit any bank or post office to open an account in this scheme. The documents you need to open the account for this scheme are the photocopy of your Aadhar Card, Pan Card, and your passport size photo. One can also open a joint account with the spouse in this scheme. At the time of opening your account in this scheme, you also have to put your money as a lump-sum amount and the interest will start on it on the first day of opening the account. The interest will be paid to you quarterly at the first date of every month such as 1st March, 1st April, and so on until the 5 years of its maturity.
Pradhan Mantri Vaya Vandana Yojana
This scheme has started as Senior Citizen Scheme from the Government which is the scheme of LIC. You have to apply online or offline for this scheme. It works as a policy provided by LIC. At present, the interest rate provided in this scheme is 7.4%. The interest you will receive in this scheme will remain constant and be deposited every month in your attached savings account. It is a pension-based investment plan which is usually a good option for retired persons or senior citizens. The pension provided to you from this scheme is Rs. 1000 per month, Rs. 3000 quarterly, Rs. 6000 half-yearly, and Rs.12,000 per year at a minimum rate of interest whereas, one can be benefited by Rs. 9,250 per month, Rs. 27,750 quarterly, Rs. 5,550 half-year and Rs. 1,11,000 per year at the maximum rate of interest in investing the lump-sum amount of minimum Rs. 1, lac to Rs. 15 lacs in this scheme. The minimum age of applying in this scheme is 60 age or above.
How to open the account in PMVV Scheme?
To open the account of the PMVV Scheme one should be a Resident of India whereas, documentation needed to open the account in this scheme are:
- Aadhar Card
- Pan Card
- Bank Account Number
- Mobile Number
- Passport size photo
It is a single investment premium plan where the time period of investing is a minimum of up to 10 years or more and you can redeem your interest as Pension monthly, quarterly, half-year, or yearly according to your choice. If one wants to exit from this scheme before the date of its maturity then, the amount of 2% is deducted from your capital investment and the rest of the money will be paid out to you.
Tax-Free Bonds Or Government Bonds
Bonds are usually the shares through which a corporate company can lend money from you and invest it in their company and provides you bonds from their earned profits. Perhaps, government bonds are the most trusted schemes to invest your money as they are risk-free.
There are four types of government bonds that will be beneficial for senior citizens or retired persons. These are explained below:
- HUDCO-N3 Series Bond: This is a government institution that issues these bonds to raise funds for its development projects. The starting value of this bond is Rs.100 but at present, these bonds are raised to Rs.1100 in the market which provides 8.1% of the interest rate.
- REX-N5 Series Bonds: This also runs under the government institution. The face value of this bond is Rs.1000 and now it is trading as Rs.1200 per share. The interest rate of these bonds is usually 8.01% but as it is trading more than its face value, the profit one will gain is 6.4% which is almost the higher rate of interest as compared to another bank’s schemes or bonds. These bonds are the best option for those people who are in the higher tax bracket and not be beneficial for the person who is in the low tax bracket due to some circumstances.
- HUDCO-N2 Series Bonds: these bonds were started in 2012 and will expire in 2027. These bonds are not (EEE) investment option but (AA) rated investment as these bonds are from the government institution HUDCO (Housing and Urban Development Corporation of India) perhaps, you can choose these bonds for your investment as they are risk-free and have the interest rate of 8.2% but, due to its trading value more than its facing value, you will only gain the interest of 7-7.5% on it.
- REC-N6 Tax-Free Bonds: These bonds will provide you the return rate of interest of 8.46% on each bond. REC (Rural Electrician Corporate) is a government-based institution that works in electricity development programs. To become financially capable this institution sells their bonds to help them in working on their projects. The face value of these bonds is Rs.1000 only but now it is trading at Rs.1300 in the market. Hence, it will be a good option for the tax-free returns investment plan.
Recurring Deposit (RD)
If one is saving a few amounts of money in a month such as Rs.500, Rs.1000, Rs.2000 or more, one can choose and invest his money as a regular income per month. The maximum limit of investing your savings is up to 15 lacs.
There are 4 types of RD available for the different age groups in which Senior Citizen RD is also available. In Senior Citizen RD, one will be benefited from 0.5% incentives in every interest rate.
Benefits of Senior Citizen (RD)
The benefits of (SCRD) are explained below:
- It provides tax benefits to the investor who invests their money up to Rs.1.5 lacs but if they are taking interest of 10% per month then the TDS will be deducted from it.
- This scheme provides secured returns with your secured investment. One can invest for the long-term, at the average interest rate of 7% approx. which is almost quite different in different banks or companies.
- The loan facility is also available in this scheme at different criteria based on different banks or post offices.
- This scheme also provides you the lump-sum amount after the time period of 1 year which can surely help you with your financial needs.
Features of Senior Citizen (RD)
The basic features of Senior Citizen (RD) are listed as follows:
- If one exits from this scheme before the maturity period then, one has to pay some charges on it for its premature exit.
- The interest gain on these FD will be provided to you quarterly only.
- It is the best option for the person who wants to invest regularly means, on monthly basis from a small amount of his saving with secured returns.
- One can also extend the date after its maturity period from a minimum of 6 months to a maximum of 10 years.
Saral Pension Yojana
The Saral Pension Yojana has been introduced by the government which is available from 1st April 2021 for the public. This is such a simple Pension plan. The Insurance Regulatory & Development Authority of India (IRDA) has introduced this scheme to all the life insurers which are available in all the banks through the guidelines on Standard Individual Immediate Annuity Product, as “Saral Pension”. In this scheme, the Annuity rate might be different from company to company but, the name will remain the same as Saral Pension. It is an Immediate Annuity Plan or you may call it ‘Immediate Pension’ as well. One can take the pension in this scheme as monthly, quarterly, half-yearly, or yearly according to their choice. In this plan, one has to pay a single-time premium in their account and then can receive the pension plan for a lifetime.
There is two option to opt for this scheme:
- Lifetime Annuity with 100% returns of Purchase Price: In this scheme, the investment is based on only a single person for their lifetime, and the amount which a person invest as its Purchase Price will get back to its “Nominee” after the death of the account holder or investor but the tax provided in this scheme will not be refunded in this situation.
- Joint Life Annuity with a provision of 100% Annuity to the Secondary Annuitant on Death of the Primary Annuitant and returns of 100% Purchase Price: This option is based on Joint Annuity. The Primary Annuitant can get its pension until the death occurs and after that, the Secondary Annuitant will be provided by this pension at the same rate of interest, and after the death of the Secondary Annuitant as well then the Purchase Price will get back to its “Nominee”.
Who can take the Saral Pension Yojana?
People with a minimum age of 49 years to the maximum age of 80 years can take the advantage of this scheme.
Features of Saral Pension Yojana
The main features of the Saral Pension Yojana are listed below:
- The minimum amount of investment in this policy is Rs.1000 or above.
- This is the life policy term which means, one can take the advantage of its pension for a life-long period.
- The loan facility is also provided in this policy which will be available after the six months of its starting date. The maximum amount of the loan that can be granted under the policy shall be such that effective Annual Interest Payable on loan which does not exceed 50% of the Annual Amount Payable under the policy.
Frequently Asked Questions
Q1. How do the Retirement Plans work?
Ans. A Retirement Plan offers pensions with secured interest. The pensions may be Monthly, quarterly, half-yearly, or yearly. These pensions help the retirees to live a better life after the age of retirement.
Q2. List some Pension Plans which are chosen by Senior Citizen or Retired person in India.
Ans. The list of Pension Plans which are used by most of the Senior Citizen or Retired Person in India are as follows:
- Pension Funds
- Deferred Annuity
- Life Annuity
- Immediate Annuity
- National Pension Scheme (NPS)
- Guaranteed Period Annuity Plan
- Cover with Pension Plan
Q3. What things a person do remember before buying a Pension Plan?
Ans. The things to remember before buying a Pension Plan are listed below:
- One must not choose a product just for its tax benefits only but also suits their current income and investment goals.
- One should read and research about all the benefits offered and the condition of post maturity and all the terms of the scheme before buying it.
- One should consider his current income and fix an amount of investment according to it
- One should also estimate his financial goals.
Q4. Who should adopt the Pension Plan Schemes?
Ans. It is a must to every individual that he/she should invest in the Pension Plans for the financially secured life after retirement. This also helps a person to retire early if they wish, the corpus on the maturity of one’s investment must be enough to support a person for the rest of the life. Hence, to do so, one must choose the retirement plan smartly.
Q5. What are the benefits of the Retirement Plans?
Ans. The benefits of the Retirement Plans are as follows:
- The Retirement Plans provide guaranteed pensions to the individual.
- It provides tax efficiency.
- It also has liquidity.
- These plans also have premature value.
- It is flexible to the age group of 70 years.
- These plans provide financial security after retirement.