Products that can generate income in your retirement

Retirement is something which is one of the biggest financial goals not just amount-wise, but also importance-wise. Interestingly, people in our country usually give more priority to other financial goals like child’s education, vacation, etc. above retirement planning. However, it is very crucial to understand that the late you start saving for retirement, the more you would need to save.

Retirement is usually divided into two parts, pre-retirement (accumulation phase) and post-retirement (distribution phase). While in accumulation phase, we have EPF (Employee Provident Fund), many of us also subscribe to PPF (Public Provident Fund) and some invest in insurance plans and so on. So, at the time of retirement, we have a lumpsum corpus with us to deploy in such a way that we can get a regular income till we remain alive. This phase is distribution phase. If you are in accumulation phase or you want to ensure a regular income in your distribution phase, then following are some of the products which you may consider investing in.

Senior Citizen Savings Scheme (SCSS)
Senior Citizens Savings Scheme is a savings instrument from the Government of India. This scheme is offered to Indian residents who are aged over 60 years. The maturity of the deposit is after 5 years from the date of account opening. However, it can be extended by an additional 3 years. Currently, the rate of interest provided by SCSS is 8.6 per cent. This is the highest interest rate among other small savings schemes available in India.

Bank Fixed Deposits
Bank Fixed Deposits (FDs) is also one of the options to park some of your retirement corpus. Though the post-tax interest rates are pretty low, they may offer you great amount of safety and also liquidity. You may consider parking your emergency fund in the fixed deposits.

Annuities
Annuity plans provided by insurance companies are another option that you should consider investing in. Annuities will give you regular income in the form of pension. They do carry drawbacks such as the interest rates are low and the income that you earn is taxable. For your NPS (National Pension System) balance, 40 per cent of the amount is tax free and you need to park the remaining part in annuity plans.

Mutual Funds
Mutual funds are one of the most preferable investment products not just in pre-retirement phase, but also in post-retirement phase. You may consider investing some part of your retirement corpus in debt mutual funds to ensure low risk and regular income. The remaining part can be invested in either hybrid funds or equity mutual funds depending upon your risk tolerance. Meanwhile, it is advisable to have some part invested in equity funds as over the long-term it will help you to beat inflation.