Â
INVESTMENT OPTIONS FOR RETIREES
FALLING INTEREST RATESÂ
This article was originally published on 07.08.2017 . Hence the rates would have since undergone changes mostly downwards . For the latest interest rates , CLICK HEREÂ
Normally  a retiree , who is dependent  on the income derived  from his  retirement benefits  , looks for  a  safe and secure  investment . Bank deposits are  most popular investment plans as they  assure   good returns with  safety  of investment .  But in last many years  , the deposit interest  rates  of the banks have shown steady decline  . For example , State Bank of India  which was offering  9.25 % for senior citizens  in  November  2013   , is now offering only  6.75%  for a 10 year deposit  for a senior citizen .    The prospect  of regaining old interest rate back in foreseeable  future is bleak in the current economic environment .  As inflation is  held steady  in recent years  , clamoring for lowering the interest rates is growing  from both government side and  corporate  side .  The lower interest rate is , of course  good for the economy   and benefits many sections of the society  as it also induces growth  .  But in this overall good scenario ,  one section badly hit is  of the Retirees  and senior citizens  who fall back  on  income derived from  the  retirement benefits they would have got  at the time of their retirement . Â
Take the case  of Mr Suresh  , a non-pensioner retiree who  retired in 2012 , with terminal benefits of Rs 50 lakhs  say  ( Most of the retirees  would not  have received so much of amount )  .   For Mr Suresh , it was  the first time  he was dealing with such  such a big amount  . So  he preferred safe and secured  investment of his  "big "  money  , which he had seen  first time in his life   and naturally invested the entire amount  with a public sector bank  . The bank offered him an interest rate of 9.75 %  pa   which fetched him a monthly  payment of  Rs 40,000  . The amount was not only sufficient  for him  to pay rent  of Rs 10,000  per month  , run monthly expenses of Rs 20,000  and  around Rs 5,000  for  other miscellaneous expenses  including tax payable  of  and a savings of Rs 5,000  .  So  he was happy  and content with his  financial  status . Â
 After a  year  in 2013 ,  Rent became Rs 10,500 as  Rent agreement had a clause of 5 %  annual increase   . With inflation  rate  of  10 % , his expenses grew to  Rs 22,000 per month  . he managed  to contain his  miscellaneous expenses  to Rs 5,000  . Still he could manage to save  Rs 2,500  per month  .  In 2014 ,  Rent became  Rs11,000 ,  family expenses became  Rs 23, 300  with an inflation of 6 %  . he tightened the belt and continue to manage  his miscellaneous expenses with Rs 5,000 only  . But now his  savings were paltry Rs  700 per month only . But still he could live within his income .  In 2015 , rent became Rs 11, 500  , family expenses grew to  Rs 24, 500  and savings turned  negative of Rs  1, 000   and the shortfall he financed from the savings he had in  2013  .  In 2016 , rent became Rs 12,000  , family expenses grew to Rs  25,700  and  monthly shortfall grew  to   Rs 2,700 month .  Most of his savings in 2013 and 14  were utilized towards  the shortfall . He could manage . Now  , when Mr Suresh  went to the bank  to renew his deposit   , shock was awaiting him . Bank manager told him that  interest rate is just 6.75 %  and he would get a  monthly payment  of Rs 28,000 only  . Mr Suresh is in a dilemma now  whether to renew  and if renewed  how to manage both ends .  He is also looking for other avenues  to  shift his investment  for better yield . Now what are the avenues open to Mr Suresh ?  . He doesn't want to risk his money  with investment in doubtful / shady  concerns who promise him a  very high return .  He wants  both safety of capital and  a  reasonably good return to manage his household .   We are trying to explore possible alternatives  and listing out the options available  , keeping safety of capital as  prime concern . ​
 ARTICLE ON                    Â
    HEALTH INSURANCE OPTIONS FOR RETIRED BANKERS The article explores the alternate avenues for  existing  health insurance group policy for Retired Bankers TO READ THE ARTICLE                              CLICK HERE ​ GOVERNMENT BACKED INVESTMENT AVENUESSENIOR CITIZEN SAVINGS SCHEME   ( SCSS )  : ​ The scheme is  operated by Indian post  and available  in post offices  throughout India .  A senior citizen  can invest a maximum of Rs 15 lakhs  in the scheme  . Maturity after 5 years  with an interest of  8.3%   quarterly compounded and interest payable quarterly  .   LIC VARISHTA BIMA YOJANA 2017 The scheme is  operated by  Life Insurance Corporation of India  .  The scheme is  for 10 years  and fetches interest rate of 8 % pa . Interest in form of pension is payable monthly  .  A maximum amount of  Rs 7.5 lakhs can be invested  by senior citizens . GOI  8% ( TAXABLE ) BOND 2003 ( The scheme is closed for subscription since 2.01.2018 ) The bonds issued by reserve Bank of India and are sold through SBI , Nationalised Banks and few private sector banks like ICICI , HDFC etc .  Bond is issued for a period of 6 years .  As name suggests , interest rate is 8 %  taxable .  One can receive interest annually or at the time of maturity . ​​ NATIONAL SAVINGS CERTIFICATE  : The scheme is  operated by Indian post  and available  in post offices  throughout India .  Investment in the scheme  gets tax rebate under 80 c of the income tax act .  Scheme is for 5 years  . Interest at 7.8 %  pa and payable only on maturity . TIME DEPOSIT ACCOUNT WITH POST OFFICE : One can deposit any amount  and a deposit of 5 years fetches  interest of 7.6 %  with annual payment of interest MONTHLY INCOME  SCHEME OF INDIAN POST  ( MIS )  The scheme is  operated by Indian post  and available  in post offices  throughout India . One can invest a maximum of Rs 4.5 lakhs   in the scheme .  Maturity after 5 years with an interest of 7.5 % pa  with monthly payment of interest .   KISAN VIKAS PATRA  ( KVP )  The scheme is  operated by Indian post  and available  in post offices  throughout India .   The scheme is for 115 months and 7. 5%  pa and payable only on maturity . ​ BANK FIXED DEPOSITS
Interest Rates for fixed deposits  vary bank to bank .  Public Sector Bank  State Bank of India was found to offer 6.75 % pa  for a   senior citizen's deposit for 5 years while  private sector bank  ICICI Bank was  found to offer  7% pa for similar period .  While smaller Public sector bank  , Vijaya bank offered 6.75 % for similar deposits , small Private sector bank  RBL offered  7.85 %  pa  .  Most of the banks were paying in between 6.5 % pa  to 8 % pa for a 5 year deposit ​
FOR LATEST FDÂ RATES , CLICK HEREÂ
NBFC / CORPORATE DEPOSITS
Some of the reputed Non- Banking Finance companies like Shriram transport finance , Bajaj Finance , Mahindra & Mahindra Finance are offering  between 7.65 % pa  to  8.10 %  for a  deposit for 5 years . ​
DEBT MUTUAL FUNDS
Mutual Funds do not  guarantee any fixed return  or safety of capital , unless they are  capital  protected funds  . Any how return is not guaranteed . Some of the capital protected funds  have yielded earlier  around 6 % to 13 %  . Some of the top ranked  debt mutual funds had also yielded around  11 % pa in last three years ​
MR SURESH'S Â DECISIONÂ Â :Â
Mr Suresh did not consider  other investment  avenues of shares  and equity mutual funds  , as   capital is at risk   in the investment . Similarly he  did not want to invest his  money  in high yielding  deposits with  private companies / individuals  . He didn't want to invest in gold or real estate as they would neither fetch regular income nor offer  safety of capital . Now for Suresh ,whatever the decision he  takes  for optimizing  tax  benefit ,  return  and safety , his  investment  income is bound to be lesser than  what he was getting with the bank at 9.75 % . He has to  reduce his expenses to manage his finance .  Readers are free  to offer suggestions to Mr Suresh  for better returns . ​
TO KNOW  ABOUT  TAX ON RETIREMENT BENEFITS  , CLICK HEREÂ
​TO KNOW ALL ABOUT IT RETURNS  , CLICK HERE  ​HOW TO LINK AADHAR TO PAN ?   CLICK HERE PLAN YOUR FINANCE PRUDENTLY  . For Financial Planning , CLICK HERE FIXED INCOME PLANS       PRECAUTIONS WHILE INVESTING IN STOCK MARKET ​ FOR INCOME TAX NEWS  CLICK HERE     FOR NEWS ON INTEREST RATES  CLICK HERE ​
DISCLAIMERÂ Â :
No content on this blog should be construed to be investment advice. You should consult a qualified financial advisor prior to making any actual investment or trading decisions. All information is a points of view of the author , and is for educational and informational use only. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments. Point of view expressed by the author is solely of the author and not of the website . ​
0 Comments
|
MANJUNATHAN BELLUR ​RETIRED DEPUTY GENERAL MANAGER , INDIAN OVERSEAS BANK |