There are two images that come to mind when you think about your old age.
One., fine sunny mornings surrounded by friends in your comfortable retirement home with all facilities , trying to do all the things you wanted to do since your youth.,
Two.,being dependent on your grumpy children and being treated unfairly by you son or daughter-in-law
Every one want to be in the first scenario, being independent irrespective of age should not be one of your options, it should be your only option. Most people think planning for retirement stops the moment you retire., but the reality is far from your plan. Retirement is not an event but a long phase in your life that can last up to 30 or 35 years. During those decades, inflation cuts down the value of your savings ruthlessly. If your savings do not earn enough, then you are going to run out of them within your lifetime. Nothing can be worse than a long period of old age where you are gradually losing prosperity and then eventually entering poverty. And yet, all around you, you can see any number of senior citizens to whom this is happening. In order to be fully prepared for your retirement, you have to continue to learn and invest in various plans and take full advantage of all the benefits the govt provide you as a senior citizen.
Let’s take a simplified example. Suppose you retire today with say Rs 1 crore as your retirement savings. You place it in a bank fixed deposit. A year later, it is worth Rs 1.07 crore. So you have earned Rs 7 lakh, which you can spend, right? Not so fast. Assuming a realistic inflation rate of 5 per cent, if you want to preserve the real value of your principal, you must leave Rs 1.05 crore in the bank. That leaves Rs 2 lakh that you can withdraw to spend over an year, which is Rs 16,666 a month. Is that enough? For a middle class person, surely not.
While there are many investment options that are exclusively made to cater senior citizens like senior citizens savings scheme or monthly income scheme from the post office which offer safe returns., mutual funds are better choice to increase your chances of higher returns.
Why is mutual fund a better option for a senior citizen?
Because the returns are higher than normal investment options available.
But you might be wondering about the risks associated with them.
There are many other options in mutual funds which still give you your higher returns for lot less risk. Like,
Debt-oriented hybrid schemes: these schemes are a mix of debt and equity. While majority investment is in debt., but they have a small amount invested in equity to give higher returns.
Equity-oriented hybrid schemes: these schemes have investments majority in equity
(almost upto 65%) and remaining in debt. While compared to pure equity funds they are lower in risks, but it is not completely risk free unlike some advisors claims. At best you can invest in these schemes with a minimum of fiver years in mind.
Balanced schemes: most retirees invest in balanced schemes with the plan of drawing regular dividends. But the important factor to keep in mind these types of mutual funds will only declare dividends only if they are making profits.
Retirement income income funds: these will allocate your money across a diversified portfolio
Of stocks and bonds. They are managed with a goal of giving you monthly returns which is distributed to the investor.there are two types of returns in this scheme.,
1. produce high monthly return while using your principle amount for payouts.
- lower monthly returns with combining goal of preserving the principle amount.
In retirement income fund, you can control your principle and can access money at any time.
The most important point to keep in mind is that invest in mutual funds only if you have extra amount after looking making sure you have money set aside for all your expenses and future emergencies.
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