Even after retirement, money will still always be on your mind. It is entirely normal to continue to worry about having enough and even think about ways to continue to save. With your fixed income, it is still a good idea to save at least 15% of your pre-tax income. There are a few different places to do this other than your regular savings account. Look into all your options. Below are a few popular choices.
SCSS
Senior Citizen’s Saving Scheme is one of the most popular options that retirees need to look into. The largest draw to this method is the high-interest rate along with the payouts that can happen more frequently. The perks do not end there. It is also a risk-free investment that also allows for some tax exemptions. If you decide to withdraw early, there is a penalty, but the maturity is just five years. Talk to your financial professional to go over the drawbacks and know if this is a worthwhile scheme.
Bank Fixed Deposits
Bank Fixed Deposits are also a safe investment, making it ideal for those with limited amounts to invest. When setting up a Fixed Deposit, you can set the tenor starting at six months all the way up to five years. With this type, you cannot access your money early without a large penalty. One thing that you can do if you end up in an emergency is to take a loan against your fixed deposit. The loan can be up to ninety percent of the total value of your Fixed Deposit. The money you earn through interest will be taxable income.
Mutual Funds
Mutual Funds are the most popular investment type. There are many perks to this type of investment. When you buy a mutual fund, you are also hiring a professional to manage it. This is a considerable convenience and help, knowing that someone is looking out for your money. The risk is also lowered as they use diversification. This is achieved by taking your money and investing in many different stocks. A disadvantage is that you need to trust those managing your money, as they could abuse their authority. Take care when choosing and check in often to make sure they are progressing in your best interest.
Municipal Bonds
Another safe investment is Municipal Bonds. Like a few of the others, these are safe investments with low default risks. A top reason that many will choose this type of investment for their money is that they are tax-exempt from federal and, in some areas, local income tax as well. There are a few disadvantages as well. When interest rates rise, it is common for the market prices on the bonds to go down. Municipal Bonds also do not hold up as well against inflation as stocks do.
What is suitable for one person’s finances may not be right for you. Research your options and speak with a professional.