How To Choose The Right Retirement Investment Options
You may choose from different investment options however, opting for the right financial instruments is important.
The chosen retirement investment options should not only grow your savings but also give you a regular income during your golden years. While selecting the investment plans, consider the following factors.
- Write down your retirement goals
- Determine your regular expenses and take into account an inflationary increase in the costs
- Consider all your income sources after you retire, such as pension funds, insurance policies, etc.
- Estimate the number of years you will survive after retirement
- Think about your risk appetite
These points will enable you to estimate the retirement corpus you will need, which can help you identify the right retirement investment plans.
How Does A Retirement Calculator Help In Planning Your Retirement
Scripboxs Retirement Calculator helps in understanding how much one would need to ensure an adequate amount for effective retirement planning. However, the retirement calculator online requires specific details to calculate the retirement corpus.
Basic details such as present age, retirement age, and life expectancy are required to project the expenses and the duration of investments.
The calculator also requires monthly expenses such as utility bills, house rent, driver/maid/ cook salaries, maintenance, fuel, leisure, medicines, etc. It determines the future value of these expenses. Using the inflation rate, the calculator estimates the future value of the costs.
Personal details such as marital status, dependents, city of residence, habits are also captured in estimating the retirement corpus. These details help in understanding the family status and design the plan accordingly.
Current investments are also assessed to understand how much more needs to be invested to attain financial independence during retirement.
Based on the above details, the retirement calculator online determines the retirement corpus. Scripboxs Retirement Calculator India doesnt end here it also advises a suitable plan to make investments to achieve the corpus over the years.
Fix Deposit Bank Accounts
This is probably the most common form of NRI investment in India. With a fixed deposit, you deposit money into an account and it is kept safe for a predetermined amount of time. You cant withdraw the funds before the period is over. The money plus the interest is paid out to you after the period has ended.
Three Types of Fixed Deposit Accounts
There are three main types of fixed deposit accounts that serve as NRI investment options in India:
Non-Resident External Account The money of such an account is kept in rupees. Its easy to return the money to dollars. Interest rates on these accounts vary depending on the deposit size and/or bank. You can expect interest rates to be around 7% to 9% per year.
Non-Resident Ordinary Account This account type is generally used by NRIs to control their Indian income. Rent income, dividends from investments, or pension funds can be paid into these accounts. These accounts have a current limit of $1 million that is allowed to be transferred from this account to a U.S. account per year. Take note the interest earned on an NRO fixed deposit is taxed at a rate of 30%.
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What Is A Retirement Calculator
A Retirement calculator is an online tool that helps in determining the retirement corpus. It is better to start planning the retirement funds needed for a stress-free lifestyle post-retirement and start investing in it. The retirement calculator helps in figuring out how much one needs to grow their wealth before retiring.
Retirement requires a combination of Personal and Financial Planning. Personal planning determines satisfaction during retired life, while financial planning helps in budgeting income and expenses based on the personal plan.
Personal Planning can be done by answering a fundamental yet powerful question yourself. How would you want to spend time during your retirement?
While financial planning will help estimate whether one has adequate retirement funds to achieve the kind of retirement that they are envisioning. Mostly, income during retirement would be either through government pensions or employment-related sources or personal investments.
All this is easier said than done. Therefore, Retirement Calculator India makes it easy for investors to determine their retirement corpus and start investing in it.
Think About Other Retirement Costs
You may be faced with several issues that affect your retirement planning. For example, you may have to choose whether to pay for your child’s college or provide for adult children who still live at home, instead of putting much-needed funds into your nest egg.
Consider also whether it would be wise to purchase long-term care insurance . This can help prevent your retirement savings from being used to cover expenses from a long-term illness instead of being used to finance the retirement lifestyle you have planned.
Scss Or Senior Citizen Savings Scheme
SCSS is another excellent investment option in the present for senior citizens. It is a long-term investment scheme offered with additional benefits also. This scheme is available in post offices and authorized banks. Thus you can easily avail this investment option.
In this scheme, you get the higher investment option and the deduction of up to Rs1,50,000 under 80C. As this is the scheme for retired persons, you need to give the nominees name. The best thing about this scheme is that it gives a 7.4% interest rate compounded annually. In this scheme, you can invest up to Rs15,00,000 and not more than that.
Best Investment Options In India For 2021 With High Returns
I saved my first 10,000 rupees in 2001 when I was a student and worked part-time, playing as a DJ at wedding functions. I invested in a Fixed Deposit because my father said that FD is the safest investment option.
I realized that FD hardly provides any return when I saw my FD value not growing after 3 years. The 10,000 rupees that I had invested had increased to just 12,000 rupees. But I was expecting my investment to grow to at least Rs. 18,000 in 3 years.
I started looking at other options that can provide 2-3x returns in a few years. I discovered multi-level marketing schemes, chit funds, forex trading, betting, stock trading and safe investments like PPF, post office savings schemes and recurring deposits.
I got fascinated by stocks as I could learn analyzing business and economics. I started investing in stocks after I got my first corporate job. I made the common mistake of investing in stocks without proper knowledge and ended up losing 30% of my money within a year of investing.
After this loss, I reflected on my personal financial goals. I also read a lot of books on investing and realized that targeting unrealistic returns is foolish. Also, putting all the money in one investment is also not wise.
Then on, I started diversifying my investments across different instruments with a target return of 15% per annum.
I have explained in my course CashCow- how to use 3 variables to design a balanced portfolio that can give more than 15% annual return.
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How To Invest In Scripboxs Retirement Plan
Scripboxs Retire Confident Plan
Scripbox Retire Confident is a goal-based investment plan that will help you start monthly SIPs for your post-retirement financial needs.
You can customize to suit your needs after factoring in your current income, expenses, savings, planned retirement age, etc. Market indicators, such as, rate of inflation, are also factored in to decide the investment needed for you to lead a stress-free retired life.
You can follow the following steps to invest in Scripboxs Retire Confident Plan:
Start By Saving At Least 10% Of Your Income
Remember your pension income and success of retiring at your desired age depends on how much of your present income you save for your retirement goal. If you have 30 years to spare the best you can do under Indian economic conditions is to invest at least 10% of your take-home income towards retirement goal.
This should be a safe investment in long-term pension or retirement plans.
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Why Do We Need Tax Planning
Please check the below Income Tax Slab for India
Note This applies to Individuals/HUF
You can locate yourself according to the above-given table and can easily know your Tax Slabs Rate.
Now comes into the picture schemes that help us to save taxes.
You should have two objectives in your mind
1. Reducing Tax liability by investing in tax saving instruments
2. Creating funds for your retirement while investing in tax saving schemes.
If this is crystal clear we can now proceed to the next section.
Pradhan Mantri Vaya Vandana Yojana
In the year 2017, the Pradhan Mantri Vaya Vandana Yojana was introduced for all senior citizens. Operated and managed by LIC , Pradhan Mantri Vaya Vandana Yojana is a retirement-cum-pension scheme. It is an instant annuity plan that provides a fixed sum regularly to you as an investor, once you invest a lump sum amount in this scheme.
This investment option for senior citizens was initially offered from May 4, 2017, to March 31, 2020. It was then extended for an additional 3 years up to March 31, 2023.
Benefits Of Mutual Funds Over Other Retirement Plans
What Is An Emergency Fund
When it comes to our personal finances, many of us have changed the way we view our money matters. A recent survey done by Scripbox, a digital wealth manager, found that creating an emergency fund has emerged as the top financial goal in the current environment. So what is an emergency fund? It is a contingency fund that not only helps financially during most difficult times but also prevents the derailment of your saving for long term goals.
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Successful Retirement Planning Should Strike A Balance Between Realistic Return Expectations And The Desired Standard Of Living
The time to repair the roof is when the sun is shining John F. Kennedy
It is often said that life begins at 60. Usually at this age, people retire and pursue their long-cherished dreams. For some, it might be travelling and exploring new places whereas some may want to learn a new skill or even start a new hobby. However, the phase of retirement also means that the flow of income would be dried although the expenses would still continue.
India used to be a nation of big and joint families, where younger generation used to lookout elderly people. However, with the large-scale urbanisation, the families have started to shrink and nuclear families are on the rise. As per a CRISIL report published in March 2019, the average family size which was 5.7 members in 1992 has shrunk to 4.6 members in 2015. Thus, the pillar of support to the elderly population is on the decline. In light of this, it cannot be stressed enough that appropriate retirement planning is imperative in todays unpredictable world.
Retirement plans are referred to as pension plans. The main objective behind a retirement plan is to have a regular income stream post-retirement. Given the ever-growing inflation, investing in these plans has become paramount and a pre-requisite to sustain retirement.
There are multiple options to choose from, while selecting a retirement plan suiting specific requirement.
Income Tax Deductions/exemptions Allowed In Income Tax Computation
Let me show you some examples
Have you ever read your Income Tax Computation Sheet?
If not, please sit with your CAs, Consultants and have a look at the following things.
There are two categories
- The scheme is backed by the Government of India.
- This scheme was launched for the unorganised sector.
- They have a lock-in period of 15 years, but you can extend it after every 5 years.
- Currently, FY 2020-21, the Rate of Interest is 7.1 %
- Every year minimum we can invest Rs. 500 and maximum Rs. 1.5 Lacs.
- EEE Category which means your investment, as well as the interest earned, will be completely tax-free which makes PPF very attractive in India.
- Investment Risk in the PPF is very low.
- Initially, it was launched with help of post offices across India.
- Now you can easily open a PPF account with your bank.
Kyuki Risk hai tho Ishq hai, tabhi tho High Return hai !
Equity Linked Saving Schemes Mutual Funds
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Best Investment Schemes After Retirement For A Monthly Income:
Housing and real estate: The demand for real estate and housing is constantly on the rise. This means that once you invest in real estate, your investment is bound to grow in value over time. However, it is important to invest in areas that have a high demand and high prices. This option can be a good source of monthly income, if you decide to put a commercial or housing property on rent.
Investments in mutual funds: Mutual funds let you gain from periodic dividend returns while providing value and growth to your invested amount over a tenure.
However, investing in equity can be risky. There are various kinds of mutual funds you can choose from, like tax savings funds, which allow you to enjoy tax benefits.
The safe and classic company FDs: Your savings can be put to excellent use by investing in regular company fixed deposits. These offer immense growth to your investment over the tenor and also deliver fixed periodic interest payments. FD interest rates for senior citizens is usually higher. Bajaj Finance, for example, offers its retired customers an attractive interest rate on its Fixed Deposits.
Post office monthly instalments: This investment scheme offers payout on a monthly basis. It requires a minimum investment of Rs.1,500 and a maximum of Rs.4.5 lakh and pays interest at around 7- 8%. This option is taxable and may not be suitable from those in the higher income bracket.
Additional Read: How to get a monthly income with an investment of Rs. 50 lakh?
Lets Look At All The Details Of The Senior Citizen Saving Scheme:
This investment plan for senior citizens is only for Indians aged 60 years and above. It is not applicable for HUFs or NRIs . The only exception in age criteria are citizens who opt for the Voluntary Retirement Scheme or Superannuation while theyre 55-60 years of age or retired defense personnel between 50 and 60 years of age.
- Rate of Interest
The current interest rate offered by this senior citizen scheme is 7.4%. These rates are reviewed every quarter, with the last review being March 31, 2021. This new rate applies solely to new deposits from that date, not to already existing ones. While SCSS rates of interest are open to being revised every quarter, these changes will not apply to already-enrolled investors. New rates of interest only apply to newer investors of a particular quarter.
- Investment Amount
The maximum investment amount in SCSS is Rs. 15 Lakh, and the minimum is Rs.1000. You can invest a lump sum amount individually or jointly. The total investment cannot exceed Rs. 15 Lakh across all your accounts in this scheme. Again, this is being heavily discussed and debated by market watchers. Interest Payout
Maximum tenure of the Senior Citizen Saving Scheme is 5 years. After this, you can extend it for 3 more years. This is a one-time option. What must be noted is that upon extension, the interest rates applicable at that particular quarter would apply.
- Early Withdrawal
- Tax Implications
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The Basics: Savings Bank Account Or Cash
One-month expenses as a reserve can be kept in a combination of saving bank account and cash. Though cash is highly discouraged, there are many emergencies when it is the only option. Many natural disasters like storm, excessive snowfalls etc. may impact internet connection and so digital payment options may not work. Therefore, it may be a good idea to keep some amount cash to manage 7-10 days expenses. Rest you can keep in your saving bank account.
7. Senior Citizens’ Saving Scheme 8. Pradhan Mantri Vaya Vandana Yojana 9. Real Estate10. GoldRBI Taxable BondsWhat you should do
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All you need to know about ITR filing for FY 2020-21.)
You Can Have An Employer
Let’s consider an example. Say 52-year-old JP works for a corporation and participates in its 401 plan. JP also runs a consulting business on the side. JP adopts a Solo 401 for his consulting business.
Compensation allowing, JP’s contributions to his employer’s 401 plan can be up to $19,500 in 2021 , plus a $6,500 catch-up contribution. He can also contribute 25% of his net earnings from self-employment for a total of $58,000 in 2021 .
Additional income from your own business or a second job allows you to add more to your tax-deferred retirement accounts. Of course, it also creates more disposable income, which allows you to add more to your other accounts in your nest egg, including your after-tax accounts.
Before starting a business, you may want to consult with an attorney about the different legal structures to help you decide which one would be most suitable for your business. These include sole proprietorships, partnerships, limited liability companies , and corporations.
If common ownership or certain affiliation exists for multiple businesses, those businesses may be treated as one business for retirement plan contributions, limiting the aggregate contributions to $58,000 for 2021 .
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