Retirement is when you stop earning your regular income. But that does not mean you have to rely on others for your own living expenses. What one must do is save and invest in a retirement plan and create a retirement fund when one is still earning. The fund will grow to a significant corpus over a period of 25-30 years and then once you retire, you have surplus funds ready to carry out your post-retirement expenses.
Creating a retirement fund is of utmost importance if one wishes to lead a comfortable life in their later years. There are many ways to invest and build a retirement fund. Let us look at 5 different investment options that you can use to create your retirement corpus.
1) Senior Citizens Savings Scheme (SCSS)
The SCSS is a scheme specifically designed for senior citizens so that they can get a regular income. Persons above the age of 60 years can invest in SCSS, but anyone between 55 and 60 years of age can also invest in SCSS if they retired under superannuation or under VRS.
More than one account can be opened as long as the total deposit does not exceed Rs. 15 lakhs. The maturity period for SCSS is 5 years and one can open it individually or with a spouse. The current interest rate for SCSS is 7.4% annually and that is paid to the beneficiary at quarterly intervals.
2) Bank Fixed Deposits (FD)
A bank fixed deposit scheme is quite a popular investment choice for senior citizens since they give guaranteed returns with no risk. Furthermore, banks provide higher interest rates on FDs for senior citizens, and this makes it a good investment option for them. The approximate interest rate for senior citizens fixed deposits may be around the 6% mark.
3) Post Office National Savings Monthly Income Account (POMIS)
This is yet another option for investing in your retirement fund. The POMIS scheme is a 5-year investment with maximum deposit of Rs. 4.5 lakh for single ownership and Rs. 9 lakhs for joint ownership. An interest of 6.6% per annum is offered and paid out in monthly intervals.
4) Annuity plans
An annuity plan is usually offered by insurers for retirement purposes. In an annuity plan, a lump sum investment can be made and then once you retire, you will get regular payment for the rest of your life. You may also choose to continue the annuity payments to your spouse in case you pass away first.
5) Mutual Funds
You may also use mutual funds to build your retirement corpus. You can invest in debt or hybrid mutual funds and set up a systematic withdrawal plan or SWP. An SWP will ensure you get regular payments from the returns of your investment. If you have the risk appetite you can also choose to invest in equity funds to beat inflation.
As you can see, you have many options available if you’re looking to invest to create a retirement fund. You can even divide your investment among different options and save for retirement using multiple means.