Why you should invest in equity after retirement too
As the interest rates on fixed deposit have gone down by around 2.5 per cent, senior citizen can keep their money growing by investing in equity.
If a person was earning Rs 20,000 per month from his FD, a reduction of 2 per cent in the interest rate is a reduction of 20 per cent from his income. That means he will now earn Rs 16,000 per month.
According to experts, the move towards a lower interest rate economy, while great news for the economy, is of little relevance to older, retired people. Lower inflation and interest rates, better fiscal management and higher economic growth carry no benefit for them because they are no longer in the earning and accumulative phase of their lives, reports ET.
The best way to keep your money growing is to invest in equity in a measured, de-risked and tax-efficient way.
According to ET report, first, keep roughly three years' expenses aside and gradually invest the remaining amount into a set of two or three conservative hybrid funds (balanced funds). After three years, you can start withdrawing every year from these balanced funds an amount that is roughly 3 to 4 per cent of the remaining sum.
The amount from this would be more or equal to what one was earning from fixed income deposit.
Experts say that the value of the remaining investment will also grow at roughly the inflation rate and the best part is that the income will be tax free.