Retirement is a bittersweet moment that marks the beginning of a relaxed life. However, stats indicate that not everybody takes retirement seriously.
If you are someone who wants to invest in the right options today for a comfortable retirement tomorrow, this blog is for you.
We will walk you through 10 investment options that can help you manage your expenses after retirement. We’ve also included 3 bonus investment options that you can choose from!
The 10 Best Retirement Investment Options
1. Indian Stocks
The Indian stock market is a long term investment tool with historical returns ranging from 9-16%. Stocks are divided into 3 categories:
Large-cap stocks (blue-chip stocks)
You’d be interested to know that there are 4000+ companies that trade on the NSE and BSE. Let’s take a look at the broad set of benefits and risks of Indian stocks.
Potentially high returns over 5+ years
Post-tax returns that beat inflation
Company based risks
2. Debt Mutual Funds
Debt mutual funds invest in money market instruments or debt instruments like treasury bills, bonds, etc. Historical data suggests that debt funds may give returns better than a bank savings account.
The returns range from 7-9%. Debt funds also include short term investment vehicles like liquid funds, ultra short term funds, and overnight funds.
Less volatile than other mutual funds
Interest rate risks
Highly liquid asset
Better returns than a bank fixed deposit or savings a/c
Bond issuer defaults
3. Equity Mutual Funds
Equity funds invest in stocks to deliver long term capital growth. Equity funds are classified into 4 categories based on the type of stocks they invest in:
Historically, equity funds have been known to give returns between 8-16%. Let’s take a look at the pros and cons of equity mutual funds at a glance.
Potentially high long term returns
Tax-free returns beyond a holding period of 12 months
Change in fund objective
4. Retirement Funds
Retirement funds invest in stocks or debt instruments to generate income through returns for post-retirement. Retirement funds are also known as pension funds.
Low risk - Fixed Returns
Improper fund management
Contributions tax-exempt up to ₹1.5 Lakh
Unit-linked schemes may be volatile and risky
Monthly annuity or lump sum payment post-retirement
Inflation based risks
5. Public Provident Fund (PPF)
A Public Provident Fund (PPF) is a long term, government-backed savings scheme that also generates a decent interest rate. PPF also carries tax benefits.
15 year lock-in period
Returns barely beat inflation
6. National Pension Scheme (NPS)
The National Pension Scheme is a post-retirement, income-generating option backed by the government. NPS requires an individual to contribute a fixed amount during their working years.
Better returns than PPF
Lower tax benefits compared to ELSS funds
Tier I contributions tax-free up to 25%
Lock-in period until the age of 60
7. Rental Income
A rental property can generate passive income in the form of a rent or lease. However, buying a rental property requires a lot of effort and a large initial investment amount.
Generates passive income
Exorbitant real estate prices
8. P2P Lending
Peer to peer lending (P2P lending) can generate a recurring monthly interest usually known as passive income. The interest rate is generally based on the lending tenure and can range from 9-14%.
Recurring monthly interest
Potentially high returns
Thoroughly vetted borrowers
Watch this video to know more about P2P lending
While gold can’t generate passive income, the inflation hedged profits can be useful during an unexpected emergency or expense after retirement. This would, however, require you to sell gold.
Can beat inflation
10. Senior Citizens' Saving Scheme (SCSS)
Senior Citizens' Saving Scheme (SCSS) is a post-retirement investment option for Indian citizens over the age of 60. It is a government-backed investment option. There’s a 5 year lock-in period.
Fixed interest rate
5 year lock-in period
Guaranteed safety & returns
Account closure penalty (before 2 years)
3 Bonus Investment Options For Retirement
1. US Stocks
Potentially high returns
Currency based risks
Value of USD
Country based risks
The biggest market in the world
2. Exchange Traded Funds (ETFs)
Comparatively low expense ratio
Better tax benefits compared to mutual funds
3. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Guaranteed pension payout
Pension amount taxable
Assured rate of return
5 year lock-in period
If you want to pay your future self, watch this video
Retirement is not easy. But you can pay your future self by investing in the right options today. The assets mentioned above can help you plan your retirement portfolio. Each investment comes with its own set of risks and benefits. So it is recommended that you speak to a trained financial professional before making an investment.
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!