According to the Report of the Household Finance Committee, set up by the Reserve Bank of India, 77% of Indian households do not plan for retirement and most of the households (more than 50% of the population) hope to depend on support from their children.
The figures are worrisome and the trend is scary as non-planning for retirement could lead to low money inflow post-retirement and a downgraded lifestyle. Hence, it is important to take prudent steps and start planning for retirement as early as possible. Let’s look at five of the best investment options to save for post-retirement:
1. Fixed deposits (FDs)
Fixed deposits are a popular investment option for retirement planning. While some may consider stocks and mutual funds to be high yielding options, but they are not devoid of market risks and demand a lot of time and research for selection and regular monitoring of their performance. Little knowledge of the stock market could lead to loss of entire life savings.
Fixed deposits in comparison are a safe bet and give higher returns – as much as 8.25% per annum – as compared to some other saving options. Bajaj Finance Fixed Deposits is one good option that offers 7.85% interest rate on FDs, which can go up to 8.20% Interest on Senior Citizen Fixed Deposits. One can check the returns on his/her FDs using the FD calculator on Bajaj Finance website.
As per a recent survey conducted by SEBI, covering both rural and urban population, more than 95% of Indians prefer to invest in fixed deposits, while the rate of people opting for mutual funds or stocks was only 10%.
2. Public Provident Fund (PPF)
PPF is another good retirement planning option. Investments made in PPF are exempt from tax under Section 80C of the Income Tax Act. PPF offers high returns, but, is an unpopular saving option, because:
➢It has a lock-in period of 15 years
➢There’s a cap on the maximum investment of Rs 1,50,000 that one can make in a year.
FDs in comparison have a flexible maturity period from 7 days to 10 years, depending on the scheme one chooses, and have no maximum limit on investment amount.
3. Employees’ Provident Fund (EPF)
Under this scheme, the employer deducts a certain fixed percentage, generally 12% of the basic wages, from the employee’s salary towards EPF investment. An equal contribution is made by the employer. Investments made under EPF too are exempt from tax under Section 80C of the Income Tax Act. The current interest rate on EPF contributions is 8.55%. You can withdraw a lump sum amount on retirement, and invest in high-yielding investment options that help you grow your money.
4. National Savings Certificate (NSC)
Investments under NSC too are exempt under Section 80C of the Income Tax Act. One can buy an NSC in his/her name, for a minor or jointly with another adult from the nearest post office. National Savings Certificates have two fixed maturity periods – five years or ten years. The interest rate under NSC is 8.1% per annum and the interest earned is added back to the investment and is compounded annually.
5. Post Office Monthly Income Scheme (POMIS)
POMIS is yet another great saving option where one can invest up to Rs 4.5 lakh under single ownership and up to Rs 9 lakh in joint ownership. The rate of interest for POMIS accounts is currently 7.8 % per annum.
Investment options are wide and so are your chances to make better investment decisions. When you start investing early, you can accumulate more wealth and secure your post-retirement life.
Also Check: Easy Fixed Deposit Interest Calculator