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INVESTMENT OPTIONS FOR RETIREES
FALLING INTEREST RATESĀ
This article was originally published on 07.08.2017 .Ā Hence the rates would have since undergone changes mostly downwards .Ā For the latest interest rates ,Ā CLICK HEREĀ
Normally Ā a retiree , who is dependent Ā on the income derived Ā from his Ā retirement benefits Ā , looks for Ā a Ā safe and secure Ā investment . Bank deposits are Ā most popular investment plans as they Ā assure Ā Ā good returns with Ā safety Ā of investment . Ā But in last manyĀ years Ā , the deposit interest Ā rates Ā of the banks have shown steady decline Ā . For example , State Bank of India Ā which was offering Ā 9.25 % for senior citizens Ā in Ā November Ā 2013 Ā Ā , is now offering only Ā 6.75% Ā for a 10 year deposit Ā for a senior citizen . Ā Ā Ā The prospect Ā of regaining old interest rate back in foreseeable Ā future is bleak in the current economic environment . Ā As inflation is Ā held steady Ā in recent years Ā , clamoring for lowering the interest rates is growing Ā from both government side and Ā corporate Ā side . Ā The lower interest rate is , of course Ā good for the economy Ā Ā and benefits many sections of the society Ā as it also induces growth Ā . Ā But in this overall good scenario , Ā one section badly hit is Ā of the Retirees Ā and senior citizens Ā who fall back Ā on Ā income derived from Ā the Ā retirement benefits they would have got Ā at the time of their retirement .Ā Ā
Take the case Ā of Mr Suresh Ā , a non-pensioner retiree who Ā retired in 2012 , with terminal benefits of Rs 50 lakhs Ā say Ā ( Most of the retirees Ā would not Ā have received so much of amount ) Ā . Ā Ā For Mr Suresh , it was Ā the first time Ā he was dealing with such Ā such a big amount Ā . So Ā he preferred safe and secured Ā investment of his Ā "big " Ā money Ā , which he had seen Ā first time in his life Ā Ā and naturally invested the entire amount Ā with a public sector bank Ā . The bank offered him an interest rate of 9.75 % Ā pa Ā Ā which fetched him a monthly Ā payment of Ā Rs 40,000 Ā . The amount was not only sufficient Ā for him Ā to pay rent Ā of Rs 10,000 Ā per month Ā , run monthly expenses of Rs 20,000 Ā and Ā around Rs 5,000 Ā for Ā other miscellaneous expenses Ā including tax payable Ā of Ā and a savings of Rs 5,000 Ā . Ā So Ā he was happy Ā and content with his Ā financial Ā status . Ā
Ā After a Ā year Ā in 2013 , Ā Rent became Rs 10,500 asĀ Ā Rent agreement had a clause of 5 % Ā annual increase Ā Ā . With inflation Ā rate Ā of Ā 10 % , his expenses grew to Ā Rs 22,000 per month Ā . he managed Ā to contain hisĀ Ā miscellaneous expenses Ā to Rs 5,000 Ā . Still he could manage to save Ā Rs 2,500 Ā per month Ā . Ā In 2014 , Ā Rent became Ā Rs11,000 , Ā family expenses became Ā Rs 23, 300 Ā with an inflation of 6 % Ā . he tightened the belt and continue to manage Ā hisĀ miscellaneous expenses with Rs 5,000 only Ā . But now his Ā savings were paltry Rs Ā 700 per month only . But still he could live within his income . Ā In 2015 , rent became Rs 11, 500 Ā , family expenses grew to Ā Rs 24, 500 Ā and savings turned Ā negative of Rs Ā 1, 000 Ā Ā and the shortfall he financed from the savings he had in Ā 2013 Ā .Ā Ā In 2016 , rent became Rs 12,000 Ā , family expenses grew to Rs Ā 25,700 Ā and Ā monthly shortfall grew Ā to Ā Ā Rs 2,700 month . Ā Most of his savings in 2013 and 14 Ā were utilized towards Ā the shortfall . He could manage .Ā Now Ā , when Mr Suresh Ā went to the bank Ā to renew his deposit Ā Ā , shock was awaiting him . Bank manager told him that Ā interest rate is just 6.75 % Ā and he would get a Ā monthly payment Ā of Rs 28,000 only Ā . Mr Suresh is in a dilemma now Ā whether to renew Ā and if renewed Ā how to manage both ends . Ā He is also looking for other avenues Ā to Ā shift his investment Ā for better yield .Ā Now what are the avenues open to Mr Suresh ? Ā . He doesn't want to risk his money Ā with investment in doubtful / shady Ā concerns who promise him a Ā very high return . Ā He wants Ā both safety of capital and Ā a Ā reasonably good return to manage his household . Ā Ā We are trying to explore possible alternatives Ā and listing out the options available Ā , keeping safety of capital as Ā prime concern .Ā ā
Ā ARTICLE ONĀ Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā
Ā Ā Ā Ā HEALTH INSURANCEĀ OPTIONS FOR RETIRED BANKERSĀ The articleĀ explores the alternate avenuesĀ forĀ Ā existingĀ Ā health insuranceĀ group policy for Retired BankersĀ TOĀ READ THE ARTICLEĀ Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā CLICK HEREĀ ā GOVERNMENT BACKED INVESTMENT AVENUESSENIOR CITIZEN SAVINGS SCHEME Ā Ā ( SCSS )Ā Ā :Ā ā The scheme is Ā operated by Indian post Ā and available Ā in post offices Ā throughout India . Ā A senior citizen Ā can invest a maximum of Rs 15 lakhs Ā in the scheme Ā . Maturity after 5 years Ā with an interest of Ā 8.3% Ā Ā quarterly compounded and interest payable quarterly Ā . Ā Ā LIC VARISHTA BIMA YOJANA 2017Ā The scheme is Ā operated by Ā Life Insurance Corporation of India Ā . Ā The scheme is Ā for 10 years Ā and fetches interest rate of 8 % pa . Interest in form of pension is payable monthly Ā . Ā A maximum amount of Ā Rs 7.5 lakhs can be invested Ā by senior citizens .Ā GOI Ā 8% ( TAXABLE ) BOND 2003Ā (Ā The scheme is closed for subscription since 2.01.2018Ā )Ā The bonds issued by reserve Bank of India and are sold through SBI , Nationalised Banks and few private sector banks like ICICI , HDFC etc . Ā Bond is issued for a period of 6 years . Ā As name suggests , interest rate is 8 % Ā taxable . Ā One can receive interest annually or at the time of maturity .Ā āā NATIONAL SAVINGS CERTIFICATEĀ Ā :Ā The scheme is Ā operated by Indian post Ā and available Ā in post offices Ā throughout India . Ā Investment in the scheme Ā gets tax rebate under 80 c of the income tax act . Ā Scheme is for 5 years Ā . Interest at 7.8 % Ā pa and payable only on maturity .Ā TIME DEPOSIT ACCOUNT WITH POST OFFICE :Ā One can deposit any amount Ā and a deposit of 5 years fetches Ā interest of 7.6 % Ā with annual payment of interestĀ MONTHLY INCOME Ā SCHEME OF INDIAN POST Ā ( MIS )Ā Ā The scheme is Ā operated by Indian post Ā and available Ā in post offices Ā throughout India . One can invest a maximum of Rs 4.5 lakhs Ā Ā in the scheme . Ā Maturity after 5 years with an interest of 7.5 % pa Ā with monthly payment of interest . Ā Ā KISAN VIKAS PATRA Ā ( KVP )Ā Ā The scheme is Ā operated by Indian post Ā and available Ā in post offices Ā throughout India . Ā Ā The scheme is for 115 months and 7. 5% Ā pa and payable only on maturity .Ā ā BANK FIXED DEPOSITS
Interest Rates for fixed deposits Ā vary bank to bank . Ā Public Sector Bank Ā State Bank of India was found to offer 6.75 % pa Ā for a Ā Ā senior citizen's deposit for 5 years while Ā private sector bank Ā ICICI Bank was Ā found to offer Ā 7% pa for similar period . Ā While smaller Public sector bank Ā , Vijaya bank offered 6.75 % for similar deposits , small Private sector bank Ā RBL offered Ā 7.85 % Ā pa Ā . Ā Most of the banks were paying in between 6.5 % pa Ā to 8 % pa for a 5 year depositĀ ā
FOR LATEST FDĀ RATES , CLICK HEREĀ
NBFC / CORPORATE DEPOSITS
Some of the reputed Non- Banking Finance companies like Shriram transport finance , Bajaj Finance , Mahindra & Mahindra Finance are offering Ā between 7.65 % pa Ā to Ā 8.10 % Ā for a Ā deposit for 5 years .Ā ā
DEBT MUTUAL FUNDS
Mutual Funds do not Ā guarantee any fixed return Ā or safety of capital , unless they are Ā capital Ā protected funds Ā . Any how return is not guaranteed . Some of the capital protected funds Ā have yielded earlier Ā around 6 % to 13 % Ā . Some of the top ranked Ā debt mutual funds had also yielded around Ā 11 % pa in last three yearsĀ ā
MR SURESH'S Ā DECISIONĀ Ā :Ā
Mr Suresh did not consider Ā other investment Ā avenues of shares Ā and equity mutual funds Ā , as Ā Ā capital is at risk Ā Ā in the investment . Similarly he Ā did not want to invest his Ā money Ā in high yielding Ā deposits with Ā private companies / individuals Ā . He didn't want to invest in gold or real estate as they would neither fetch regular income nor offer Ā safety of capital .Ā Now for Suresh ,whatever the decision he Ā takes Ā for optimizing Ā tax Ā benefit , Ā return Ā and safety , his Ā investment Ā income is bound to be lesser than Ā what he was getting with the bank at 9.75 % . He has to Ā reduce his expenses to manage his finance . Ā Readers are free Ā to offer suggestions to Mr Suresh Ā for better returns .Ā ā
TO KNOW Ā ABOUT Ā TAX ON RETIREMENT BENEFITS Ā ,Ā CLICK HEREĀ
āTO KNOW ALL ABOUT IT RETURNS Ā ,Ā CLICK HEREĀ Ā āHOW TO LINK AADHAR TO PAN ? Ā Ā CLICK HEREĀ PLAN YOUR FINANCE PRUDENTLY Ā . For Financial Planning ,Ā CLICK HEREĀ FIXED INCOME PLANSĀ Ā Ā Ā Ā Ā Ā PRECAUTIONS WHILE INVESTING IN STOCK MARKET ā FOR INCOME TAX NEWS Ā CLICK HEREĀ Ā Ā Ā Ā FOR NEWS ON INTEREST RATESĀ Ā CLICK HEREĀ ā
DISCLAIMERĀ Ā :
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 viewĀ 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 authorĀ is solely of the author and not ofĀ the website . ā
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MANJUNATHAN BELLURĀ āRETIREDĀ DEPUTY GENERAL MANAGER , INDIAN OVERSEAS BANKĀ |