Life has many stages. The first few years, as a child, are fun. Over time, you start studying and working, marking the beginning of adulthood which is filled with work and responsibilities. By the end of this phase, you look forward to retiring and spending your twilight years at home.
As beautiful and peaceful as this sounds, retirement comes with a host of worries. The biggest being: How do I pay the bills?
Money never ceases to be a worry.
Give your parents financial independence
A majority of the elderly and retired—about 85%#—do not have a pension. Without an income or pension, financially supporting themselves becomes quite the task.
The government and various financial institutions understand this issue, which is why they have introduced investment plans that include a host of benefits such as high interest rates and low taxes for senior citizens. This mostly reduces the dependency on their children and relatives for monetary support.
What are the options?
There are many traditional and market-linked options for investing such as Senior Citizen Saving Scheme, Post Office Monthly Income Scheme, Fixed Deposits, Pension Plans and schemes launched by Mutual Funds.
Here we talk about the three among the different investment options for your parents.
• Mutual Funds: Seeks to generate benefits, subject to market risks
Mutual Funds offer a variety of investment options for senior citizens’ investment needs and if senior
citizens develop a good understanding of risks, they can identify appropriate schemes that are suitable for
their investment needs across their investment tenures and interest rate scenarios. One such option is Conservative Hybrid Funds
The reason that Conservative Hybrid Funds are one of the preferred options is because they are managed by experts who invest
your money in instruments like bonds of reputed companies and securities (bonds) issued by Government
of India which are considered relatively safe in order to generate regular income. A small part (between 10-25%) is also
invested in equity i.e. stocks of Indian companies to help stay ahead of inflation. It’s a small allocation, but
one that goes a long way in helping to build wealth in the long run. For someone who’s slightly older, it’s
better to opt for an instrument that gives you minimal equity exposure and seeks to generate monthly
income. And if your parents can take risks & have surplus money, over & above their periodical income
requirements then they may consider investing a portion of their money in Equity Linked Saving Scheme for
tax saving purpose. It will not only save tax for them butalso aims to give them better inflation adjusted
returns as compared to traditional saving instruments in the long run.
• Senior Citizens Saving Scheme: A boon for senior citizens
The government offers a feasible investment scheme called the Senior Citizens Saving Scheme. You can
invest up to Rs 15 lakhs in this scheme.The amount invested in the scheme also cannot exceed the money
one receives on retirement. Therefore, one can invest either Rs 15 lakh or the amount received as a
retirement benefit, whichever is lower. You can also reduce your tax outgo as this scheme is covered under
Section 80C of the Income Tax Act, subject to eligibility. Whatever you invest in this scheme – up to Rs 1.5
lakh – is deductable from your taxable income, subject to eligibility. The tenure of the scheme is five years,
which can be further extended for three years.
• Post Office Monthly Income Scheme (POMIS): Safe and secure investment option
Post Office too offers a Monthly Income Scheme with a guaranteed annualized return. The maximum
amount you could invest is – Rs 4.5 lakh in single account or upto Rs 9 lakhs in joint account. This scheme
works much like a Fixed Deposit, but with monthly interest payments for a period of 5 years. The
investment in POMIS doesn't qualify for any tax benefit and the interest is fully taxable.
The last word
Today’s investment is tomorrow’s earning. It plays a vital role in satisfying the needs of happy retired life. So invest smartly for your parents and allow them to “keep calm and retire on”!
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.