Money may not be an issue for an individual earning income regularly. However, this may not be the case for retired individuals as their constant cash flow gets stopped and the requirements continue. If your retirement funds are your only source of income post-retirement, then it is recommended that you start to plan your financial behavior and start investing in assets capable of earning you a good monthly income. You must plan your income as inflation rates are going higher and with the increase the cost of living increases. Thus it will be difficult for you to plan your financial needs if you do not have an income other than your mere retirement fund.
If you are still not aware of the different opportunities, here is a list of retirement planning opportunities for you to earn monthly income with long-term stability and a high return on your investment.
Investment opportunities
A. Real Estate
Real estate is one of the fastest-growing sectors in India and holds a prospectus in different sectors such as retailing, housing, manufacturing, commercial, hospitality, etc. Investing in real estate assets is one of the best choices for retirees as they will be able to earn a steady monthly income in the form of rent and also build their wealth in the long run. Real estate also offers high capital appreciation and lower risk, which makes it even attractive. Industrial experts think that the investments made in the real estate sector are profitable as the price of the property appreciates every 6 months.
Some of the key features of a real estate investment include:
- Investments have a high tangible asset value
- Helps in portfolio diversification with lower risk volatility and high returns
- If you are investing through platforms such as Assetmonk which offers properties based on blockchain technology, you can liquidity your investment.
The major drawback of the sector is the high capital requirement. But, here’s Assetmonk, to your rescue! You can also invest using a crowdfunding model which helps you to own a share in big-ticket projects with less capital.
B. Bank Fixed Deposits
Bank deposits are a common investment option for retirees as safety and fixed returns go very well with retirees. Another feature of fixed deposits that pull investors is their ease of operation. At present, the interest stands at a rate of 7.25% per annum for a tenure of 1-10 years. Senior citizens also get an extra 0.25-0.5% per annum depending on the bank. Some banks also offer 7.75% per annum for a longer-term.
Unlike investment options such as SCSS and POMIS, fixed deposits are more flexible in terms of tenure. Thus, it is recommended that investors spread their money in different maturities through a process called ‘laddering’. This is very important and beneficial not only because it provides liquidity to funds but also helps in managing reinvestment risk.
For those looking forward to investing by saving on tax, the fixed deposit may be a good option as the investment qualifies for deduction under Section 80C of the Act. However, such investments will have a lock-in period of 5 years and early withdrawal may not be possible. Even though the income received on interest is taxable, there are some deductions or set-offs available by the amount of tax saved at least in the year of investment.
C. Mutual funds (MFs)
Investing a portion of your retirement funds into equity-backed products may be important. It is important to note that the retirement income is subject to inflation even in their retirement years. Various industry experts have opined that making investments in equity can deliver higher inflation-adjusted returns than others.
Thus it is recommended that retirees allocate a certain percentage of their retirement funds to equity mutual funds based on their risk profile and expose it to balanced and large-cap investment options that can help in diversifying their portfolio and mitigating risk. Debt Mutual funds are another great investment option for retirees. The taxation laws on the debt funds are something that provides it an upper hand over bank deposits. Interest earned on bank deposits is fully taxed based on their tax bracket while the income received on the debt funds are taxed at a flat rate of 20% after indexation if it has been held for a period of 3 or more years irrespective of the tax bracket it falls under. Another attractive factor for investors is that it offers easy liquidity.
D. Tax-free bonds
Tax-free bonds are also another very attractive investment option for retirees. Some of the institutions offering tax-free bonds include Indian Railway Finance Corporation Ltd (IRFC), Power Finance Corporation Ltd (PFC), National Highways Authority of India (NHAI), Housing and Urban Development Corporation Ltd (HUDCO), Rural Electrification Corporation Ltd (REC), NTPC Ltd and Indian Renewable Energy Development Agency. They are also considered to be one of the safest options for investing. Investors can also buy and sell them in the derivative markets as they are listed as securities.
Some of the important points to keep in mind for those planning to invest in tax-free bonds include:
- They are long-term investments that mature after 10, 15, or 20 years. Therefore invest in such options only if you do not require the fund immediately.
- The interest is tax-free thus Tax Deducted at Source (TDS) are also not imposed.
- Low liquidity rate
- They provide annual and not monthly payouts, thus it may not be suitable for retirees looking for a regular income.
E. Gold ETF
This is an investment option that is a combination of both gold and stock. Gold ETF can be bought and sold easily with any company stock. They are also an option that is passive on the premise of the gold rates which makes it an attractive option for investors due to the transparency in pricing it offers. The options are volatile but offer higher returns on the investment made. Some of the key features of Gold ETF include:
- High liquidity as it can be easily traded in a stock exchange.
- Gives you the benefit to decide the quantum you intend to buy and sell.
- Can be used as security for secured loans and the transactions can be made instantly.
The table below provides a comparison of some of the best investment opportunities for retirees in India.
| Investment options | Period of Investment (minimum) | Who can invest | Risks | Returns offered |
| Real Estate | 5 years | Anyone | Medium | 19-15% |
| Direct Equity | NA | Investors with investing experience and knows how to balance risk and return | High | NA |
| Mutual Funds | If within a scheme like ELSS, the lock-in period is 3 years | Investors with the appetite for medium to high risk | Low-High | Market -Linked |
| National Pension Scheme | 60 years | Investment suitable for retirement plans | Low High | Market Linked (8-10%) |
| Public Provident Fund (PPF) | 15 years | Long term investment goals | Nil | 7.9% |
| Bank Fixed Deposits | 7 Days | Investment suitable for those with lower risk appetite | Nil | Fixed returns but varies depending on the bank |
| Senior Citizens Saving Scheme (SCSS) | 5 years | Specific for Senior Citizens | Nil | 8.7% |
| Gold ETF | NA | Anyone | Low- medium | Market-linked |
| RBU Bond | 7 years | Indian Citizens | Nil | 7.75% |
| Pradhan Mantri Vaya Vandana Yojana (PMVVY) | 10 years | Senior Citizen | Nil | 7.4% |
| Unit Linked Insurance Plan (ULIP) | Less or equal to 45 years | Investors looking for wealth creation and life cover | High | Depending on the profile |
| Post Office Monthly Income Scheme (POMIS) | 5 years | Indian Citizens | Nil-Low Risk | 7.7% |
| Initial Public Offer (IPO) | NA | Investors with Demat cum trading account | Moderate- high | NA |
The thumb rule for anyone planning to start their investment is to know the different options available to them. He must know the benefits of each of their options along with the risk associated. It is recommended that you choose an option based on your financial objective, period, and risk appetite. Thus you must invest in options capable of earning you lucrative returns in the long run. If you are looking for an investment partner then Assetmonk can become your ideal partner offering you top-quality real estate assets with high returns in top Indian cities.
