Right corpus eases retirement pangs
×
The fund for post-work life should stand the test of inflation and the test of safety of capital
Varadhan, an NRI aged 55 and retiring in 2021, has been working in West Asia for the last 30 years. He wanted to return to India and live comfortably in his home state of Kerala. Prior to retirement, he wanted to find out how much he could spend – rather, the threshold that would ensure a balanced life after retirement. Varadhan’s family includes his mother aged 85 and wife Shyama aged 51.
His assets were as follows:
Requirements
He wanted to set aside ₹12 lakh as emergency fund towards one year expenses with high liquidity and safety. Next, he desired to create a retirement portfolio with minimal risk to get an income of ₹75,000 per month (current cost) from his age 56 till age 90.
Updated Jan 01, 2021 | 13:10 IST
The deposits from the small savings schemes are credited to the National Small Savings Fund – a fund that the government has previously dipped into to reduce its reliance on market borrowings. Representational image. | Photo Credit: PTI
Key Highlights
With the economy suffering from a slump in consumption resulting from the COVID-19 pandemic, bankers have contended that the rates ought to have been slashed in line with the repo rate
According to the latest reports, the government s fiscal deficit had reached Rs 10.75 lakh or 135.1 per cent of its annual target by the end of November
By keeping the rates unchanged, the government is effectively encouraging investors to deposit more money into these schemes
Synopsis
This comes as a relief for fixed income investors, especially senior citizens, as currently there are only three investment options with returns more than 7%: the RBI floating rate bonds, Senior Citizens Savings Scheme and the Pradhan Mantri Vaya Vandana Yojana.
Getty Images
RBI launched the floating rate bonds in lieu of the earlier 7.75% taxable bonds which were withdrawn.
With the government maintaining status quo on interest rates of small savings schemes for the last quarter of the current fiscal, the Reserve Bank of India s (RBI) Floating Rate Savings Bonds, 2020 (Taxable) will continue to fetch the same interest rate, i.e., 7.15% till the next reset date of July 1, 2021.
1-MIN READ
Interest Rate on PPF, NSC, Other Small Savings Schemes Unchanged for Q4
A man counts Indian currency notes inside a shop in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas/Files
Public Provident Fund (PPF) and National Savings Certificate (NSC) will continue to carry an annual interest rate of 7.1 per cent and 6.8 per cent, respectively.
FOLLOW US ON:
New Delhi:The government on Thursday kept the interest rates on small savings schemes, including PPF and NSC, unchanged for the January-March quarter amid moderating bank deposit rates. Public Provident Fund (PPF) and National Savings Certificate (NSC) will continue to carry an annual interest rate of 7.1 per cent and 6.8 per cent, respectively.
Synopsis
Retired folks should focus on both capital preservation with steady appreciation and access to ample liquidity to manage themselves financially well during their retired life.
iStock
It is very important for a retired person to plan, protect, and invest his or her hard-earned money to ensure financial stability. Having a conservative approach with the core purpose of capital preservation and steady capital appreciation should be the broad investment framework. For someone with a low-risk appetite, a combination of products like Pradhan Mantri Vaya Vanda Yojna, Senior Citizens Savings Scheme, RBI Floating Rate Bonds, Public Provident Fund, Kisan Vikas Patra, National Savings Certificate, National Savings Monthly Income Scheme, Bank Fixed Deposits and debt mutual funds of higher credit quality may do the job. A retired person can look at creating his or her portfolio which will help provide capital stability, steady appreciation and liquidity.