In today’s time, with never-ending expenses and a limited income, tucking away enough money for your later years could appear virtually impossible. How do you ensure that your funds comfortably earn you a regular income and still last your entire lifetime? You can always ensure a regular income after retirement if you take the right steps.
Here are some instruments to achieve this goal.
Senior Citizen Saving Scheme (SCSS)
This scheme has been crafted especially for senior citizens seeking income after retirement. This scheme currently offers an attractive interest rate of 7.4% per annum, with the interest being paid out on a quarterly basis. The amount invested usually matures in 5 years and can be extended to 3 more years.You can invest up to Rs 15 lakh and rely on quarterly interest pay-outs for liquidity needs. In this scheme, tax is deductible from the source investment.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This is a scheme offered by the Life Insurance Corporation (LIC) of India. It gives a guaranteed payout of pension at a specified rate for 10 years, making it suitable for retirees. You can invest up to Rs 15 lakh and it also promises a return of 7.4%. It also offers a death benefit in the form of a return of purchase price to the nominee.
The scheme was to end on March 31, 2020, but the central government decided to extend until March 31, 2023 due to its popularity amongst retirees. However, the interest rate was slashed from 8% to 7.4%.
Annuities from life insurance companies
An annuity is essentially a contract with an insurer, where individuals agree to pay the company a certain amount of money, either in a lump sum or through installments, which entitles them to receive a series of payments at some future date.
Unlike PMVVY and SCSS, annuities offer guaranteed returns over a much longer-term of 30-40 years, covering your entire retirement phase.
The entire annuity income is taxable at the slab rate applicable to you.
Government securities or G-Secs are essentially debt instruments issued by a government. These securities can be issued by both the central government and the state governments of India. When you invest in such options, you generally gain a regular interest income. Since these are backed by the Government of India, these are virtually risk-free investments. The guarantee from the Government is also called ‘Sovereign Guarantee’. These work out better than annuities.
There are many types of government securities in India for you to choose from. They can broadly be classified into four categories, namely Treasury Bills (T-bills), Cash Management Bills (CMBs), dated G-Secs, and State Development Loans (SDLs).
While the process of investing in government securities was not easy earlier, now you can invest through NSE’s goBID platform. It is an online platform meant for retail investors who want to purchase treasury bills and Government of India Dated Bonds.