so the letter u means the video is fit for any age group a UA certificate requires Parental Guidance for children below 12 and a is for persons aged 18 and above and an sc certificate wait a minute what's SC SC means senior citizen and this video is strictly for them as we go through nine different ways of investing one's retirement money so many of you might not need this video now but if you have parents Uncle aunties who are in the 50s 60s or if you help them manage their money then this video will add a lot of value senior citizens and by extension my parents have some pretty predictable goals firstly they want to receive some regular income to run the house secondly they should be able to manage big and sudden expenses like a medical emergency they want to leave their children some money and they want that Financial assurance that that money will not run out these four objectives is what I'll try to address in this video and let's begin with post retirement product number one the interest received from fixed deposits is a very popular way of generating regular income among senior citizens now when I use the word fixed deposit I'm referring to three different investment sources the first is a bank fixed deposit which is extremely safe and it's safer because of the five lakh deposit guarantee insurance that comes along with it secondly Bank fixed deposit accounts are very easy to start and operate they also offer fixed returns which can be quite comforting and as a practice senior citizens receive an additional interest of 0.25 to 0.5 percent on their deposits in fact from time to time a few Banks even come up with some special offers for senior citizens for example the State Bank of India has a vcat program that offers an additional 0.5 percent interest on FTS that's over and above the 0.5 percent that they anyways give to senior citizens similarly ICICI Bank has a golden years program and from what I've heard and read these offers have a time limit to it and the SBI and ICICI promotions are expected to expire in the next three to six months now a lot like Bank fds there are company or corporate fixed deposits these are offered by non-banking Financial companies like htfc limited Bajaj Finance pnb housing Mahindra Finance sriram Finance etc for example I see a lot of the sriram finance ads on the internet these days and at the time of recording this video they are offering an interest rate of nine percent to senior citizens for a five-year FD and if the depositor is a woman then the interest rate goes up by an additional 10 basis points now while corporate fds work a lot like Bank FTS there is no deposit Insurance in them which means unlike Banks there is a slightly higher risk of one losing their principle in case the nbfc withdraws and for this higher risk companies offer depositors a higher rate of interest and as one can see in the stable here this differential can be pretty considerable I should also mention that many nbfc is carry a high credit rating and as a rule retirees should only invest in triply rated papers which symbolizes the highest level of safety given by credit trading agencies like Crystal care and ikra a third source of fds is the post office which is something called the post office time deposit account or potd these accounts currently offer an interest rate of 7.5 percent and to draw a comparison I would say the post office time deposit is even safer than a bank FD because while the principal and interest is protected up to five lakhs in a bank in case of a post office your entire investment is backed by a sovereign guarantee so here's how our three deposit instruments look based on different parameters and as a practice do check these for accuracy before taking any investment decision also remember FD returns are generally in line with the country's inflation rate which means the value of your money is pretty much where it was when you first made the deposit so as a retirees should have a mix of fixed but moderate return instruments like fds and their portfolio should also include some volatile but potentially High return Investments so that their wealth can continue to grow on a real basis the senior citizen saving scheme or scss is a government-backed retirement benefits program that anyone above the age of 60 can Avail the maximum investment under this program used to be 15 lakhs but in a welcome move the Ministry of Finance recently raised the ceiling to 30 lakhs one can invest in an scss from the nearest post office or bank and it has a five-year tenure which can be further extended by three years now in addition to this High investment limit the senior citizen saving scheme offers one of the highest interest rates amongst all fixed income small saving plans for instance the annual interest rate for this April to June quarter is 8.2 percent and this interest is payable on a quarterly basis now notice I said interest rate for this quarter and just to elaborate the interest rate is actually Market linked and the government announces a new interest rate every quarter which is a hundred basis points or one percent above the yield of a five-year government of India bond for instance look look at this graph here and as expected the bond yield goes up and down and within the five to eight percent range now these green boxes represent the previous scss interest rates and as one can see there is clearly a one percent markup that the scheme offers over the bond yields however when the yields fell dramatically in the year 2020 and in the first half of 2021 per the schemes mandate the interest rate should have been slashed down to 6.5 percent which didn't happen because then there would have been a massive public outcry so the government took the Hit Upon themselves and continued to keep the interest rate at 7.4 percent and now that the yields are somewhere around the 7.2 percent Mark the scss interest rates have followed their yield plus one percent mandate and they are rightfully at 8.2 percent at least for this quarter now I explained this interest rate construct to give all viewers a background but to make things clear although the scss interest rate is reviewed quarterly once an investor subscribes to it the rate 8 that was prevailing at the time of subscription will now be fixed for the entire tenure of the investment so you invest now you receive 8.2 percent per annum for the entire five-year period which makes the senior citizen saving scheme one of the highest interest rate products amongst debt instruments and a must-have in any retirees income generation portfolio the department of post has a five-year maturity scheme called the post office monthly income scheme the product pays interest on a monthly basis and can therefore be a suitable investment option for senior citizens who want regular payouts and are not comfortable investing in equities now for current rules one can invest up to 9 lakh rupees in this scheme and the interest rate which is set every quarter it's currently at 7.4 percent again the interest rate at which you make the investment is fixed throughout the entire five-year tenure which basically means the PO Mis is nothing but a fixed deposit with a monthly payout the scheme carries some additional terms and conditions around premature closures early withdrawals penalties Etc and you can find a lot more details of this on the India Post website for your benefit I have listed down some useful websites and resources in this video's description so do have a look at that and do your own research before taking any investment decisions so the story We Have Heard is retirees and senior citizens should not invest in equities because the markets are unpredictable which is another way of saying we don't know if it is going to go up or down well come to think of it the same problem exists with fixed deposits as well and just a couple of years back Banks were offering just four four and a half percent on a three year FD anyways I'm raising this point because if our portfolios post tax return is less than six and a half seven percent then we have a problem because it means our wealth is decaying Point Blank senior citizens need reinforcements which has to start by apportioning some portion of the portfolio to equities and this can be as low as fifteen maybe twenty percent of the portfolio if this is new to you then I strongly recommend you work with a fee only financial advisor but just to help out here are some mutual fund categories some combinations that can be explored keeping in mind your own level of comfort so this is where to invest the retirement money but one of the other requirements is accessibility that is how to withdraw this money on a frequent basis now there are two methods that one can consider here the first is opting for plans which are taxed as idcw or income distribution come Capital withdrawal in simple words these are like dividend plans where some money is extracted from the mutual fund nav and is paid to the investor now in my view these idcw plans are a less than ideal approach as it is neither tax friendly nor is the payment of dividend regular and guaranteed the second option is the use of swp or a systematic withdrawal plan which is a much better Redemption strategy as it allows investors to withdraw a fixed amount of money at regular intervals from their investment Corpus this generates a predictable cash flow for the retiree and this approach offers a lot more flexibility in terms of the withdrawal amount and the frequency so remember there are two parts to mutual funds A how should one go about creating a portfolio that beats inflation and yet is within the senior citizens comfort zone and secondly some thought has to go into the Redemption strategy which can pay for regular expenses and also support any ad hoc expenditure like a vacation medical expenses Home Improvement Etc one of the safest instruments out there are government bonds and these come in the form of treasury bills dated Securities State development loans Etc from what I have seen it's a less explored option because investors don't know where to start but to list down the benefits first these government issued Securities are super safe with no credit risk to your principal or to the interest these are available for long tenures like 10 20 even 30 years so if you're saving money for inheritance then this becomes a Natural Choice the bonds offer semi-annual interest payments they are liquid in the sense that they can be sold in the secondary market and although bond prices go up and down depending on the interest rate when you hold a bond until maturity the investor has a clear idea of the returns that he or she will make and historically this is in the six to eight percent range in fact at the time of recording this video a 10-year GUI Bond was yielding around 7.3 percent while a five-year paper was at 7.1 percent now buying a government security is a lot easier than it looks and there are many ways to go about it a gsec can be purchased from a bank or a post office it's available with stock Brokers including the online ones a mutual fund or ETF is an excellent way of buying government securities and in particular lookout for Target maturity funds then there are many online aggregation platforms where bonds can be bought and sold and finally there's the RBI retail direct scheme through which individual investors can directly purchase all kinds of government securities my point is senior citizens should definitely consider investing some portion of the Corpus in gsec on account of the benefits it offers and especially if the yields are somewhere close to what is being offered by other fixed deposit instruments and while we are on the subject I'll request everyone to read up on the government of India floating rate bond 2033 which has been recently launched by the RBI at a prevailing interest rate of 8.51 so that's a little homework for you if you're getting good value from this video then please do give this video a thumbs up and if you aren't a subscriber yet then do consider becoming one as I can then serve you videos as soon as they are released and also share with you some investing strategies tips and stories that are continually Post in the community section and annuity is an insurance contract that's designed to generate a steady retirement income for the annuity buyer to put it simply you can approach a life insurance company like LIC htac life icsa Prudential Etc you then invest a lump sum amount and the insurance company gives you a regular payout as per agreed terms for the next many years into the future for example LIC of India has just introduced a new jeevan Shanti plan which is a non-linked non-participating individual single premium deferred annity plan say that again sure it's a non-linked non-participating individual single premium deferred annuity plan and the way this works is let's say someone purchases an annuity of 10 lakhs at the age of 45.
Now because this is deferred annuity this person sits tight for the next 12 years allowing the Corpus to grow which means from the age of 57 the annity buyer will receive a pension of 11 190 rupees for the rest of his or her life of course this number will vary depending on the age the amount the defament period but this is pretty much how an entity plan works also there are many variants of entity plants that are offered by different life insurance companies but what might be an ideal one for senior citizens is what is called an immediate annity plan where the annity buyer puts in the lumps of money and immediately that is as early as from the next month onwards the person starts receiving a regular pension every month so check with a few life insurance companies and if you're an NPS subscriber who is about to reach the age of 60 then the knowledge of annotes is all the more important as a decent 40 percent of The NPS Corpus has to be used to purchase anti so do read up more about this real estate or property is a try tested and generally successful way of investing and I know of many senior citizens who have bought two even three houses in their lifetime of course they stay in one of those houses and the rest have been put on rent which gives them income on a monthly basis in fact many of us would have noticed that while the price of property like an apartment or a shop while the price of this property goes up and down by plus minus 20 percent the rent that we pay or receive is a lot less volatile it's this stability that attracts senior citizens towards rental income in spite of that added work around maintenance property tax bills dealing with Brokers Etc so the big question is assuming one has the capital A crore maybe two crores should he or she buy a property and put it on rent in their post retirement years there is no off the cuff answer to this because a it clearly depends on the rental yields one can expect and secondly and especially for us Indians our goals of own a property go beyond on money and we generally want to leave a house to our children as a part of their inheritance but sticking to rental eels in India and especially for Residential Properties the yields are generally in the two to three percent range maximum four percent depending on the city you live in for commercial properties the yields are a bit higher but once we shave off a percentage for maintenance security taxes Etc the returns are pretty much around the inflation rate which is definitely not a situation we want to be in of course there will be some exclusions but in my view there has to be a strong mathematical basis when investing in property however if you want to have some exposure in real estate and you don't want to commit a huge sum of capital then do explore investing via other Alternatives like reads crowdfunding timeshare and fractional real estate a reverse mortgage is a post retirement Financial product that gives senior citizens a regular source of income the process starts with the senior citizen pledging his or her house with a bank and the bank pays a regular amount to this individual over a period of time so what has happened here is that the house becomes the collateral and while technically the bank is giving a loan it doesn't pay the entire amount upfront but it is giving it in monthly installments now this might be a little confusing so let me explain this with an example so sometime back the Punjab National bank's reverse mortgage scheme was paying 435 rupees per month per lakh for a tenure of 10 years which means for an appraised home value alone of say one crore this comes to a monthly payout of 43 500 rupees which is a decent sum of money but what makes this monthly payout of 43 000 even sweeter is that the borrower doesn't have to pay back this amount what I mean is if the borrower outlives the tenure of the loan which in our case is 10 years then as next steps the bank will simply stop making any more payments but this does not mean that the borrower the senior citizen has to vacate the property in fact they can continue to stay on the property until their death now when the senior citizen does expire there are two available options option one is where the legal hairs can keep the house by repaying the loan of one crore with interest and option two is where the bank can sell the house to recover their dues and whatever remains post the sale is paid to the legal has so as a borrower as a senior citizen you get to stay in your house until you die you receive monthly income at least for a few years your legal here will not be sandbag by the bank and if that's not enough Per a recent Court ruling the monthly installments at the bank pays well that money need not be treated as income and therefore is exempt from taxes in my view a reverse mortgage is a very handy instrument to boost up a senior citizens monthly income and it's something one should definitely give a thought to when planning your post retirement financials okay retirement doesn't mean one should stop working it's a choice and I know many people who continue to work either full time or part-time on Consulting projects remote assignments taking classes at a nearby College becoming an insurance agent Etc from a financial standpoint this can be an excellent strategy that ensures one doesn't run out of money and your expenses can be taken care of from what you earn in my opinion the seeds of what you want to do professionally in your 60s and 70s should be sown a lot earlier by developing one skill your network and a touch of personal branding to go with it and this concludes our nine retirement strategies that I wanted to put forth in this video every product we have discussed has its own peculiarities in terms of expected returns tenure liquidity Taxation and related parameters and my sincere suggestion if you are a senior citizen or if you know someone who would find this video helpful is to encourage them to understand these products and start looking at multiple streams of of retirement income rather than relying on just one or two areas for instance if you were to rely only on fixed deposits then a sharp turn in the interest rate cycle something we saw in the year 2020 can really mess up your monthly income calculations the same thing goes if you are totally dependent on rental income because a tenant moving out means you won't have any money coming in as the house is still unoccupied so have a view a portfolio view on your post retirement income by and if you are in your 40s or 50s then now is the best time to build it I sincerely hope you learned something new today and if you know any senior citizens then do forward this video to them thank you once again for your time do like this video share it with your friends and I'll see you next week until then foreign
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