As long as we are we are employed, we don’t need to worry about the regular cash flow. At the end of every month, our certain salaries cover up the expenditures of the following month. But this circle of cash flow is not forever. After some years, there will be a time when we would be retired and our regular salary will stop. Even though the salary stops, the expenditures don’t.
With an increased life expectancy of Indians, the need for a regular income at retirement has increased. If you depend only on your retirement corpus then within a few years the savings are sure to evaporate and you may face financial crises at the sunset years. The retirees must make such an investment portfolio which not only provides a regular income but keeps the tax liability at bay. An ideal investment plan for retirees should be a mixed bag of fixed income and market-linked investments.
Here are Ways to Earn Regular Income After Retirement
Government Avenues
- Senior Citizen Savings Scheme (SCSS)
This is a small savings schemes for senior citizens who are citizens of India and residing in Indian territory. It attracts a higher interest rate than a bank’s fixed deposit. The present rate of interest on SCSS is 8.3%. The minimum amount that can be invested is Rs. 1,000, maximum investment is Rs. 15 lakhs. One can withdraw the interest on the investment in quarterly or on an annual basis. One has to pay tax on the interest gain if it is more than Rs. 10,000. At the same time, the income under SCSS attracts tax rebate under Section 80C (limit Rs. 1 lakh). The tenure of SCSS is 5 years which can be extended to three more years.
- Post Office Monthly Income Scheme (POMIS)
The interest which you get in POMIS is less than SCSS but it is helpful for the persons who want regular income every month. In this scheme, the interest on the deposited amount is paid to the investor on a monthly basis. The POMIS scheme matures in five years. The minimum amount one can invest is Rs. 1500 and the maximum is Rs. 4.5 lakhs in the solo account and Rs. 9 lakhs in the joint account. The income on POMIS is free from taxes.
- Post Office Term Deposits
The post office term deposit pays out its interest annually hence it may not be useful for the ones who need a monthly income. But if you have other ways of getting a monthly income, you can use this scheme. The interest rate differs with the time period of your investment. The minimum investment is Rs. 200 and there is no maximum amount. The Income is taxable and you can claim for a tax rebate under section 80C. The interest is compounded quarterly which gives out a bigger amount though the interest rate is comparatively low. Time Deposits can be opened for periods of 1, 2, 3 or 5 years.
Per Annum Interest Rates of post office term deposit are as follows:
1 Year: 6.80%
2 Years: 6.90%
3 Years: 7.10%
5 Years: 7.60%
- National Pension Scheme
This is a government approved pension scheme which can be used by any Indian citizen between 18 to 60 years. The minimum yearly deposit is Rs. 6000 which can be done by paying Rs. 500 per month. The rate of return is market linked and it is the cheapest form of market-linked investments available in India. The 40% income of NPS is taken as tax-free and on the rest 60%, you are to pay interest according to your tax slab.
Mutual Funds
Mutual funds are one of the best investment options for retired persons in India. Mutual funds are of various kinds. If you choose the right kind of plan, you will be able to earn a regular income by investing in mutual funds too. Mutual funds don’t give out a monthly payment, but it increases the value of the money which you have invested and allows you to withdraw your funds at regular intervals. Here are some useful retirement plans of mutual funds
- Dividends On Shares And Equity Mutual Funds
Dividend funds are the kind of fund where the companies share a part of its profit with its investors. The part of the profit which is shared with the shareholders is called dividends. Investing in dividend fund is a way of gaining regular income. But one should not ignore the risk factor associated with the same.
- Dividends On Debt Mutual Funds
Just like equity funds, one can invest in debt mutual funds which promise to pay of dividend to the investor. The dividend is nothing but a part of profit earned by the AMC. The investment in debt fund may give out a lower return, but it is less volatile to market fluctuations.
- Systematic Withdrawal Plan (SWP) Of Mutual Funds
Such plans allow the investor to withdraw a specific amount of money at regular intervals. This plan works perfectly for the retired ones who can invest a good lump sum amount in mutual funds and want to have a regular withdrawal which will help them financially. Once you invest a lump sum amount, you can set the amount and the frequency when you are going to withdraw from the fund. This becomes a very good source of regular income.
Physical Assets
A physical asset is a tangible item which has economic, commercial or exchange value. Some of the examples of physical assets are land, house, property, gold, equipment, or inventory. If you are a retiree, you can even use such physical assets as a source of monthly income. Here is the best monthly income plan for a senior citizen-
Reverse Mortgage
A reversed mortgage can be availed by a retiree who owns a house. It is a kind of secured loan in which the loan amount is disbursed in monthly basis. The loan amount depends on the price of the property and the age of the applicant. The longest tenure of reversed mortgage can be as long as 20 years. One can continue to live in the same house even if the tenure exhausted. A reverse mortgage borrower is not expected to pay back his loan during his lifetime. At the death of the borrower either the house will be sold by the lender or the heir of the property has to pay back the loan.
What Should One Do?
The ideal way of earning a regular income after retirement is a mix of a variety of investments. The things to keep in mind are the interest rate and the tax payments. One should not keep all his corpus for the investments which come with a lock-in period. Again investing all your corpus in a mutual fund is also not advisable as the return depends on the market fluctuations. A proper split of your retirement fund is advisable which is sure to earn a regular income at retirement.
