INVESTMENT OPTIONS FOR RETIRED PERSONS

Fixed deposit They have been the most popular product for many for decades. They are simple and easy to understand. The drawback has been the tax on interest which reduces the effective yield from the product. You can work around the tax angle by investing in your spouse's name if your spouse is not earning. This will ensure higher tax-free income. The rates have already fallen by 1.5-2 percentage points and more cut is likely in the coming quarters. One has to be aggressive with his choice of company or bank as there is a considerable difference in the borrowing rates. Monthly income plan This product is offered by different categories of institutions ranging from post offices to banks. In the case of post offices, there is a cap on the amount invested at Rs 4.5 lakhs per person. A couple can park as much as Rs 9 lakhs between them for an assured return of eight percent. Though there is no tax deducted at source from this product, the interest nevertheless is taxed depending on the income slab. Besides post offices, mutual funds too offer these plans but the returns are not guaranteed . In the case of this product, mutual funds allocate a portion of the corpus in equity which means it has an element of risk. In a rising market, these can be considered by senior citizens after taking into account the monthly needs. The advantage with a mutual fund plan is that it offers the potential of capital appreciation over a period of time. Also, since mutual funds distribute their profits in the form of dividends, they are tax-free in the hands of investors. However, such dividends are distributed after taking into account dividend distribution tax. Balanced fund At an early stage of retirement , most retirees will be in a fairly comfortable position with their money. Such investors can consider balanced funds as one of the products for their corpus. The advantage with a balanced fund is that during an equity downtrend, it acts as an excellent cushion as debt tends to be a performer during such a scenario. During an equity uptrend, they benefit from the rally in the stock prices. That is also one of the reasons why balanced funds have managed to post a good show in the last 12 months when compared with largecap focused funds. A combination of all products can ensure higher returns though the ratio of the mix depends on the risk-taking ability and liquidity comfort of the investor. Both attain significance for all class of investors particularly for senior citizens.