Say you are a working professional and you create a savings account all your life. Your inner mind tells you that these savings will last your whole life. But the real challenge begins from here. How can you be sure that your savings will be enough for you to earn a consistent income while lasting throughout your lifetime?
You might have to consider implementing it carefully so that your savings will be sufficient for hassle-free retirement life.
Here are some schemes that you might need to have in your portfolio to accomplish this objective.
Senior Citizens Savings Scheme :
The senior citizen’s savings scheme (SCSS) is a publicly funded savings instrument provided to Indian citizens aged above 60. Currently, it is considered to be one of the safest schemes for senior citizens, with the interest rate fixed at 7.4% and paid out quarterly. It is considered to be the highest interest rate among various savings instruments across India.
This scheme is available through both public and private banks and Post offices. One setback could be that the scheme comes in with a lock-in period of five years. The terms and conditions for the scheme remain the same for all the banks and post offices through which you invest as it is funded by the central government.
Pradhan Mantri Vaya Vandana Yojana (PMVVY):
The Pradhan Mantri Vaya Vandana Yojana is another plan designed exclusively for senior citizens. Similar to SCSS, a person can invest up to Rs.15 lakh with a return of 7.4%. This scheme is provided by the Life Insurance Corporation of India. It ensures to protect elderly people above the age of 60 against a dip in their income in the future due to volatile economic conditions. The scheme is free of credit risk and lasts for a long duration of ten years which attracts the elderly retired people.
Annuities from life insurance companies:
Recently, Jeevan Akshay and New Jeevan Shanti, which are annuity plans from Life Insurance Company of India are being promoted heavily. An annuity plan is a long-term investment plan that is usually issued by insurance companies such as Life Insurance Corporation of India to safeguard you from the risk of running out of income. With the process known as annuitization, the payments you make are converted into regular payments that can last forever. This works by investing a huge sum of money in annuity plans and later being paid a specific sum by the insurance company.
Many investors and financial advisors suggest government securities since it is secure and the returns are usually in the range of 6.6 to 6.75%. Government securities allow you to stay invested for about 40 years and it is preferred over annuities. You also have an option to quit without any trouble, if needed. Since India is a sovereign country, the capital invested remains safe as these are sovereign securities. Also, you will not experience any interest rate fluctuation risk, if held till maturity.