For Senior Citizens, Capital Protection is Very Important

From Live Mint | Personal Finance |

I am a 58-year-old female government employee and will retire in four months. I expect around Rs.11 lakh from retirement benefits. I will receive a monthly pension of around Rs.15,000 per month. Please advice a suitable way of deploying the money. There are no imminent financial objectives but I would like a nominal capital appreciation with limited risk. I currently have around Rs.50,000 in savings bank account and a medical insurance of Rs.3 lakh. I also have my mother as a dependant (aged 80). My son is married and well settled. My monthly expenses is around Rs.8,000.

Your needs are limited and so are your expectations. It is prudent to invest the retirement corpus with high degree of safety. You will be entitled to more tax benefits and rebates as you will be coming under the senior citizen category. Hence you can even choose investments which offer high rate of interest but are otherwise taxable. You may consider fixed deposits for the corpus amount and with interest rates being reasonably attractive, you can opt for two-year tenor, that is before you become senior citizen (60 years). The reason for not locking in for a longer tenor is that you can receive a higher rate of interest after becoming a senior citizen. On the contrary, there is a risk of interest rates coming down and if they are lower than existing rates at the time of renewal, you stand to lose. Also, you should do deposits in multiples of few lakhs and not one single deposit. This gives you flexibility as just in case if you need funds then you don’t have to break the entire deposit and instead use one of the many deposits. These deposits are tax efficient as you will come under the lower tax slab. You can further reduce your tax liability or your tax liability can actually become nil if you do tax savings. And this is where you can utilize your surplus of pension over expenditure. Any tax saving done will have a lock-in of at least five years. However it is only equity-linked savings scheme (ELSS) which has a minimum lock-in of three years. It is also recommended to take limited exposure to equity as fixed deposits can help you to achieve inflation-adjusted returns and it also helps in saving taxes that brings an additional advantage.

You can maintain your monthly average balance in the bank and make sure you continue your existing medical insurance.

You can start a monthly systematic investment plan in ELSS and funds which you can consider are Axis Long Term Equity, Religare Tax Plan and Franklin India Tax Shield. These funds have performed well but do carry an inherent risk of capital but the same is reduced if the investment is held for a long term.

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