How to Turn Your Retirement Savings into a Regular Income – Retirement Planning Guide !

How to Turn Your Retirement Savings into a Regular Income - Retirement Planning Guide !

Retirement can be a scary phase of life as the flow of a regular monthly income suddenly comes to a standstill and there is a lot of free time to make use of in addition. More often than not, working people do not invest in any sort of retirement plan and tend to defer it to a later period. If you are one of those people who is looking into the investment options available post-retirement, then here is a list of the suitable financial products.

Tips to get regular income by proper retirement planning


Senior Citizens’ Savings Scheme (SCSS)

This is one of the most secured and traditional investment options for retired professionals. The Government of India runs it and has a very high rate of interest compared to other retirement plans or savings, 8.6% to be precise. It is targeted at senior citizens aged 60 and above and people opting for early retirement.

The payment under SCSS is made on a quarterly basis while the term period is generally five-years, which can be extended to three years once your plan matures. The amount you can invest has an upper limit of INR 15 lakhs. Such an investment also provides tax benefits under section 80C and gives you the advantage of making a premature withdrawal. As it offers the highest post-tax returns, it is a good investment option for senior citizens.

Post Office Monthly Income Scheme (POMIS)

As the name suggests, it is an investment option offered by the Indian Post Office. POMIS has two investment options, one is Rs.9 lakhs for a joint account and the other is Rs.4.5 lakhs for a single account. The interest rates are currently at 7.8 percent per annum and the payment is made on a monthly basis. Moreover, the term period for POMIS is five years.

The only drawback of POMIS is that it does not offer any tax benefit and the interest generated falls under taxation.

Bank Fixed Deposits (FDs)

A fixed deposit is the most traditional income-generating investment. The regular monthly return from an FD makes it a safe and secure option for many of the retired professionals. The flexibility offered by an FD in terms of the tenure period ranges from one to ten years. Although the rate of interest in bank deposits has been falling for the last few years, the current rate stands at 7.25 percent per annum. For senior citizens, there is an extra 0.25 to 0.5 percent per annum, depending on the bank.

A person looking to meet his short-term and long-term plans can put his retirement savings across different deposits with different maturity periods. Once, a short-term FD matures, you can renew it or reinvest it for a longer period and continue the process, thus making sure you have a steady flow of income.

It is worth mentioning that retired professionals looking for tax concessions should opt for the five-year tenure FD, where they can deposit a lump sum amount and are not able to access the amount until it matures. By going for a five year-FD, you can avail tax deductions under section 80C.

Market Linked Investment Options

There are two types of market-linked products fit for retirees that come with a decent risk appetite. One is mutual fund and the other is ULIP.

  •    ULIPs- Unit Linked Insurance Plans, commonly known as ULIPs, are life insurance products that are market linked. There are various benefits associated with a ULIP like choosing across various fund options and the benefit of tax exemption under section 80C.
  •    Mutual Funds- It is a very good option for people ready to take some risk and wanting higher returns. Depending upon your risk profile, you can invest in equity-based mutual funds largely concentrating on large-cap and balanced funds to ensure a steady flow of income rather than high and volatile returns. It is best to stay away from small-cap and medium-cap equities.
  •    You can also invest in monthly income plans and debt mutual plans where the tenure and interest rates are fixed and the returns generated are high compared to an FD or pension scheme.

Therefore, to generate a steady flow of income and make your return higher after retirement, it is best to invest in a mix of traditional and market-linked investment products.

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Harshit Jain

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