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Investment Pattern of Retired Individuals

In: Business and Management

Submitted By gayathriumapathy
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For most people, the regular income comes in the form of a salary, which is paid monthly.
Because of the regularity of income during our working life, we usually adapt our spending
To fit in with our income patterns. By the time retirement comes around we usually have our
Income and spending patterns well practiced, although these may change a little in retirement.
During retirement, or at some stage before, we also need to plan what we are going to do with
Our retirement savings. Usually this will involve looking at what to do with our superannuation
Money and any other savings that we may have accumulated along the way. In view of the
Above facts, it falls on the concerned person to do financial planning in a way he/she not only
Maintains the lifestyle but also has financial independence as well.

There are many factors related to retirement planning, and it is never too early to begin. You may
Define your retirement goals and need to start a retirement savings plan before considering
Actual retirement.

Follow the following four simple steps to arrive at an ideal retirement plan.
Step 1: Decide how much income you require to live comfortably in your post-retirement
Years. Remember to take into account aspects like increased medical costs, expenses and gifts
For family.
Step 2: Calculate the amount to be received in lump sum (terminal benefits) at the time of
Step 3: Select the right retirement plan that enables you to meet your post-retirement
Requirements. Preferably, choose to invest in asset classes, which can provide you with
Potentially higher returns in the long run.
Step 4: Start investing very early so that you have time on your side and can enjoy the power
Of compounding

The following are the major investment avenues which the retired people are comfortable to invest for their future. These data are based on the survey done by us
POMIS (Post Office Monthly Income Scheme)

POMIS is a very simplistic, safe and sure way to receive a monthly income for retired people. Retirees can invest their lump sum retirement benefit under this scheme and can earn as high as 8.4% annual interest and that too, without taking any default risk on their money. The best feature of this plan is monthly pay-out of interest, which is the most critical need of distribution phase (retirement years).

Features of POMIS –

* Rate of interest is 8.5 * Maturity period is 5 years * Auto credit facility of interest * Minimum investment is INR 1500 and maximum investment is INR 4.5 Lacs for single account and INR 9 Lacs for joint account SCSS (Senior Citizen Saving Scheme)

any resident individual who has attained 60 years of age can open this account. Joint account can be opened only with spouse. Investment under this scheme qualifies for the benefit u/s 80C of the Income Tax Act, 1961. Besides tax benefits, this scheme offers a high rate of interest at the rate of 9.20% per annum with quarterly interest pay-out.
Premature closure is allowed. Monthly Income Scheme (MIS) and Senior Citizen Saving Scheme (SCSS) are the best for Senior Citizens who desire monthly/quarterly interest. Invest in MIS / SCSS and transfer interest into RD account through SB account through written request and earn a combined interest of 10.5 % (approx.). Bank Fixed Deposit

fixed deposit is a financial instrument which allows for money to be deposited with banks for a fixed duration ranging from 15 days to 5 years and above, and earn a higher rate of interest than conventional savings account. On maturity the investor receives a return which is equal to the principal plus the interest earned over the duration of fixed deposit.
Senior citizens who opt for a fixed deposit scheme are sometimes allowed an additional 0.5% on top of the regular return on offer. Deposits for 5 years or longer qualify for a tax benefit u/s 80C of IT Act, 1961. Reverse Mortgage

Retired personnel, who could not acquire many assets for themselves besides a house, can now liquidate the value of house and survive during their retirement period. In a Reverse Mortgage, the borrower pledges a property that he already owns (with no existing loan outstanding against it) and the bank in turn pays a series of cash – flows for a fixed tenure to the owner. These can be thought of as reverse EMIs.

The draft guidelines of reverse mortgage in India prepared by the Reserve Bank of India have the following features:

* Any house owner over 60 years of age is eligible for a reverse mortgage. * The maximum period of property mortgage is 20 years with a bank or HFC (housing finance company). * The borrower can opt for a monthly, quarterly, annual or lump sum payments at any point, as per his discretion. * The revaluation of the property has to be undertaken by the bank or HFC once every 5 years. * The amount received through reverse mortgage is considered as loan and not income; hence the same will not attract any tax liability. * Reverse mortgage rates can be fixed or floating and hence will vary according to market conditions depending on the interest rate regime chosen by the borrower. * Investment avenues are numerous, the key lies in making yourself aware of those and pick the suitable one for you

There are three main investment categories, or “asset classes”: stocks, bonds, and cash. Your retirement accounts should probably contain a mix of stocks and bonds and perhaps a small amount of cash, too. Some people also invest in “hard assets” like real estate or gold, but those are generally not well-suited for retirement accounts.
Stocks are shares of ownership in a corporation. They have historically provided more long-term growth than bonds. But they’ve also been more volatile, so they can lose a lot of money in the short term.
Bonds are basically interest-bearing loans you make to a company or government. They generally offer smaller long-term returns than stocks do, but also less short-term risk.
Cash, or a “cash equivalent” like a money-market fund, is the least risky asset class, but it also offers the lowest return. You might not need any cash in your retirement account until you’re approaching retirement age or in retirement.
To build a nest egg large enough to fund your life in retirement, which could last 30 years or more, you’ll need the growth that stocks provide. The catch is that stocks are generally more volatile than bonds, which means that a stock-heavy portfolio can give you some hair-raising moments (or years).So most people invest in a mix of stocks and bonds, enabling them to both capture some of the long-term growth of stocks and benefit from the relative stability of bonds during stock market downturns.
RIGHT MIX OF SHARES AND BONDS * Age 25 to 34: 80% stocks-20% bonds * Age 35 to 44: 70%-30% * Age 45 to 54: 60%-40% * Age 55 to 64: 50%-50%


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