Investment Planning for Parents – Fixed Income without Risk!

My parents are finally going to stop working for their businesses and sell them to retire. I recommended them to go on world tours, but as usual, indian parents dont like spending it all on world tour, ha ha!

If a working professional decides that they want to retire, or is over the retirement age, their income will cease. They will lose their regular income stream. This means they will need to be more careful about their spending and look for safer investments.
Planning for retirement is important. This will reduce the dependence on others to pay your living expenses. It is not enough to invest in retirement. You should continue investing. You should remember that there is always more life after retirement, so you must plan accordingly.

So, my first suggestion was to invest on NIFTY50 Companies and Index Funds and Debt Mutual Funds – but looking at their age – its recommended not to get into risk assets and funds. Now at this age of 65+, parents need security and safety of their main capital. They are ok with less returns, but they don’t want to risk their lifetime hard earned money not even by a penny.

So, low risk = low gains , high risk = higher returns or gains.
Now, after my research of a good one day of googling, I have decided to suggest them to do this and get started so they can start getting monthly fixed income without worrying about anything or working on anything. Can simply chill, eat, walk, travel and let their money work for them.

Lets say, your parents have 1cr corpus built during their retirement, then your investment planning should be 70% safe investment for fixed monthly returns, 20% liquid funds or fixed deposits for emergency, and the rest 10% should be stocks and mutual funds for some early growth.
This is just my planning, yours may differ.

Recurring Deposits and Fixed Deposits

Fixed deposits (FD) and recurring deposits (RD) are one of the most common types of investments for retired individuals. Banks also offer a comparatively higher interest rate on FDs and RDs for pensioners. Under Section 80TTB of the IT Act, an interest income up to Rs 50,000 for senior citizens during a financial year is completely tax-free.

Post Office Monthly Income Scheme (POMIS)

You can also consider investing in the Post Office Monthly Income Scheme (POMIS), which offers a regular monthly income. Though you can avail of tax benefits on investments up to Rs.1.5 lakh on tax-saver FDs that have a five-year maturity period, the interest income from the same is liable for taxation.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme operated by the Life Insurance Corporation (LIC) is a low-risk investment pension plan. It has a tenure of 10 years and it offered an interest rate of 7.4% in the previous year. However, only senior citizens above 60 years can invest in the plan on making a lump-sum investment.
The pension receivable under the scheme ranges from Rs 1,000 to Rs 10,000 per month depending on the amount you have invested. To avail of the scheme, you will have to make a minimum investment of Rs 1.56 lakh and not more than Rs 15 lakh.

Senior Citizen Savings Scheme (SCSS)

SCSS is an excellent investment option for senior citizens looking for long-term saving schemes which offer security with additional benefits. You can avail of the scheme from post offices and recognised banks around the country.
Not only is the rate of interest offered on this scheme comparatively higher than that of the regular savings and fixed deposit bank accounts, but you also get tax benefits up to Rs 1.5 lakh per year under Section 80C of the IT Act, 1961.
SCSS has a maturity period of five years with an extension of three years. It offers an interest rate of 7.4%. Moreover, you can invest a maximum amount of Rs 15 lakhs. You must provide your nominee when opening the SCSS account.

Floating Rate RBI Savings Bonds

The Bonds will be issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof. There will be no maximum limit for investment in Bonds. The tenure of the bond is 7 years from the date of issue. No interest will accrue after the maturity of the bond. Interest is payable semi-annually from the date of issue of bonds and offers interest rate of 7.15% approx.