Retirement Planning

Seven assured cash flow options

for your golden years
The requirements of a post-retirement life would be to ensure a monthly cash flow and
ensure annual increment to the monthly cash flow to take care of inflation.

Retirement is the onset of a new life free of responsibilities and full of freedom. But to
enjoy the beauty of this new phase of life and live it fully, one should be financially free.
And this is possible only when the hard-accumulated lifetime savings are put into a
well-balanced portfolio that is diversified across asset classes in the right proportion
depending on the financial goals.
While being overweight on one asset class puts one at risk, being underweight on

another can make an opportunity loss. It is required to understand the risk-reward

factors associated with each asset class and build a portfolio, review it at periodic

intervals and make necessary changes as and when required.

The requirements of a post-retirement life would be to ensure a monthly cash flow and

ensure annual increment to the monthly cash flow to take care of inflation.

Major options available

Pradhan Mantri Vaya Vandana Yojana: It is a retirement-cum-pension scheme for

senior citizens with no maximum age limit. This scheme provides an assured rate of

return of 8% for 10 years. This scheme is a good option for those who want to get

assured returns.

Senior Citizens Savings Scheme: A government-backed scheme, it provides a

low-risk, steady stream of income to the elderly along with tax benefits. Retirees can

invest up to `15 lakh individually or jointly. It is available across all banks and postal

offices. An interest rate of 7.4% is payable for the April-June quarter in the scheme.
SCSS is better in terms of liquidity owing to a lower maturity period of five years. Also,

money can be withdrawn prematurely from the SCSS account by paying a penalty.

RBI taxable bonds: These are sovereign bonds having negligible risk. Currently, the

return offered is 7.15% floating. These are taxable bonds with a maturity period of

seven years.

FDs from banks, NBFCs, corporates: As fixed deposits for senior citizens have higher

rates with assured returns, they remain the preferred investment options for them.

Currently

he highest senior citizen fixed deposit rate is 7.75% offered by Sarvodaya Small

Finance Bank for a period of five years.

Annuity plans by life insurers: Annuity plans available from insurance companies

include immediate and deferred annuity plans. While immediate annuity starts paying

annuity immediately after the lump sum amount is paid to the insurance company,

deferred annuity pays the annuity at the deferred date as required by the annuitant.

Public Provident Fund: It can be opened by any Indian citizen for a tenure of 15 years.

This scheme is favourable for retirees as it can be extended indefinitely beyond 15

years for a block of five years. This extension can be with or without fresh contributions.

The average rate of return is better than the fixed deposits and it works on the EEE

principle, i.e., no tax is payable at the time of investment, rate of return and at the time

of withdrawal.

National Pension System: The scheme allows subscribers to contribute regularly to a

pension account during their working life. On retirement, subscribers can withdraw 60%
of the tax-free corpus and use the remaining 40% corpus to buy an annuity to secure a
regular income after retirement. The average rate of return is 8-10% in the last decade.
This scheme provides additional tax deduction up to Rs 50,000 under Section
80CCD(1B).