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Monday, September 10, 2018

Regular Monthly Income Options for Senior Citizens Retirement

Retirement from job does not mean that money needs to stop growing. When you retire, you may look out for new ways to gain a fixed monthly income, which can help you fund your monthly expenses.

Pradhan Mantri Vaya Vandana Yojana

This pension scheme was launched in early 2017 and is operated by the Life Insurance Corporation of India. It assures a fixed return of 8% and following a recent Union Cabinet decision, you can now increase the investment limit from Rs.7.5 lakh to Rs.15 lakh. PMVVY can be either offline or online and you have to be at least 60 years old to be able to buy this policy. It is open for subscription till March 2020.

In this pension scheme, any difference between the interest guaranteed and the actual interest earned as well as administrative expenses are covered by the government and LIC reimburses you for the same. There is no tax benefit in this scheme but no tax is charged on maturity or on the death of the policy holder.

Tax Free Bonds   

These are certificates of debt issued mainly by public corporations such as the Power Finance Corporation, National Highways Authority of India, Indian Railways Finance Corporation and so on. These too can form an important part of your retirement portfolio although they are yet to be available in the primary market. One can buy them as securities in the stock market where they are listed as securities.

It should be noted that tax free bonds come with a long duration period of 5, 10 and even 20 years. Moreover, there is no tax deducted at source and the interest earned is exempt from tax as well. Interest earned from such bonds can be credited to your account either on monthly, quarterly or even annual basis.

Systematic withdrawals in Mutual Funds

A Systematic Withdrawal Plan is the follow-up of a Systematic Investment Plan (SIP) in a mutual fund. In a SIP, you deposit an equal amount every month towards a mutual fund. In a year or two, the mutual fund money you have invested increases in value. 

You can make use of this corpus later to manage your monthly expenses by having a certain amount credited to your account every month.

This process is known as SWP or systematic withdrawal. The balance amount in your mutual fund may continue increasing in value depending on the net asset value of the units in the fund scheme. For retirees who have taken to investing in mutual funds, SWPs have turned out to be the smartest alternative for garnering periodic income from equity mutual funds.

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