How to Invest Your Retirement Funds to Earn a Monthly Income

It is rightfully said that your actual life begins after 60 when people retire and focus on pursuing their dreams that were left unfulfilled during their working life. People spend their entire lives earning and saving for retirement, only to realize there’s a larger challenge ahead of us: how and where to invest the retirement money?

Retirees have to find good investment plans to safeguard their income. For this, it’s important that they step out of their comfort zone and take a little risk to yield maximum benefits in the near future. So, how do you ensure that your retirement money yields the best returns on investment and you have a corpus that will last throughout the golden years of your life?

How to Manage your Retirement Corpus Better

Here are five rules for investing after retirement in the post-pandemic era, according to finance experts:

1. Senior Citizens’ Savings Scheme (SCSS)

Schemes like SCSS are ideal for those investors who are looking for a significant fixed rate of return that beats inflation and assures a regular stream of income. As of 2022, the SCSS interest rate stands at 7.4 percent, which is considerably higher than what bank Fixed Deposits offer. The interest collected is taxable while the amount deposited under this scheme is deductible under section 80C. As an investor, you can either open an individual account or a joint account with your spouse if you are 60 years old or above. The best part: the minimum limit of investment is Rs. 1,000 and the maximum is Rs. 15 lakhs.

2. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The PMVVY scheme is another great alternative that offers a fixed monthly pension rate of 7.4 percent for a period of 10 years. If you are of the age of 60 or above, you can invest in this plan and choose between quarterly, half-yearly, or annual pay-outs. Though PMVVY does not provide tax benefits, it’s considered a good investment plan by finance experts in terms of liquidity. The biggest advantage is that you can access 75 percent of the invested money as a loan after three years. In critical scenarios like medical emergencies, you can withdraw a stipulated amount at a 2 percent interest rate before 10 years.

3. Bank Fixed Deposits (FDs)

Although common investment tools, FDs are highly sought-after for their predictable returns and ease of liquidation. In recent years, the interest rate on FDs has been declining, but those with a low risk appetite and looking for security can consider investing in this instrument. The good part is that bank FDs provide flexibility of duration, which means an investor can distribute the funds for different periods without locking a large amount for a specific timeframe. Retirees who want to save money on taxes can invest in the five-year tax-saving plan, which is eligible for a tax break under section 80C and cannot be withdrawn early.

4. Mutual Funds (MFs)

If you are looking for the flexibility of liquidity with good returns on investment, start investing in the best mutual fund schemes and enjoy the dual benefits of tax savings and inflation-beating returns. Typically, debt mutual funds are more likely to be safe and suitable for retirees. From amongst the debt category, finance experts from Dezerv recommend opting for funds that have lower average maturity and high-rated bonds. You can even invest in ELSS – a tax-saving mutual fund that qualifies for tax deduction under section 80C, up to Rs. 1.5 lakh per year. A wealth management company like Dezerv can even help build a portfolio of mutual funds personalized as per your needs.

5. Post Office Monthly Income Scheme (POMIS)

This government-sponsored scheme that offers a slightly lower rate of 6.6 percent, has a strong safety factor and the risk of losing money is low. The Post Office scheme has a tenure of 5 years and comes with an investment cap of Rs. 4.5 lakh for single account holders and Rs. 9 lakh for joint account holders. However, it is important for investors to know that this scheme does not provide any tax benefits.

The Final Verdict

Retirement is a blissful phase for every individual. You have sown the seeds, and now it’s time to reap the fruits of success through investments. So, if you are nearing your retirement or have already retired, consider the above-mentioned investment options and divide your corpus into three stages - short, medium, and long term. For the first five years after retirement, it is best to invest in liquid funds, as it enables immediate use. The following 10 years can be income-oriented debt schemes and the next 15 years can be in equity, to manage the downsides of inflation. These investments are subjective and may vary depending on one’s risk appetite, long-term objective, and expected outcome.

It’s wise to consult a finance expert from a professional financial consulting agency like Dezerv to be able to allocate funds efficiently and appropriately.