Many of our Senior Citizens are dependent on regular income for their sustenance. The objective of this article is to give a broad understanding on the way a simple portfolio can be constructed by Resident Indian Senior Citizens
which is safe, liquid, tax efficient and easy to manage.
- Invest Rs 15 lakhs in Senior Citizen Savings Scheme which is a 5-year product extendable by another 3 years. Interest rates are currently 7.40% p.a. Opt for quarterly payouts. One can buy this through most of the PSU
banks or Indian Post Offices.
- Invest Rs 15 lakhs in Pradhan Mantri Vaya Vandana Yojana (PMVVY)which is a 10-year product. Interest rates are currently 7.40% p.a. Opt for the monthly payouts. One can buy this through most LIC branches or online.
- Invest Rs 15 lakhs or more in RBI Floating Rate Bonds which has a lock in of 6 years for Citizens above 60 years (above 70 years – 5 years and above 80 years- 4 years). Interest rates are currently 7.15% p.a. and only paid half yearly. Interest rates can go up and down based on the interest rate scenario.
- Balance 10-25% can be parked in bank accounts for liquidity related needs. This is an absolute must.
- Invest annually Rs 1.50 lakhs in Tax saving FD’s or Postal National Savings Scheme to reduce taxable income under Section 80C. One can contribute to PPF account too if one has already started it sometime back.
The above portfolio is perfect for Senior Citizens whose financial portfolio is below Rs 75 lakhs to Rs 1crore and one has no other income from pensions and rents. As a rough estimate, Rs 1 crore invested in the above strategy would yield roughly Rs 55,000 income per month and that too without any taxes and tensions. Rs 50,000 deduction for Senior Citizens under Section 80TTB and Rs 1.50 lakhs under Sec 80C would help in tax efficiency. My firm view is one need not have any complications of market linked products in such portfolios no matter whatever the returns one gets from competing products. Let the need
(and not greed) be the prime driving force in building this portfolio. Hence, these senior citizens can give a damn to political/economic scenario and still have a comfortable income.
Other points to note:
- Senior citizens having larger financial portfolios (greater than Rs 75 lakhsRs 1 crore) and/or having large other income (like rentals/pensions) should look at portfolios of stocks, mutual funds and REITs in addition to www.naveenrego.com
the above for the best benefits. Here too with proper planning one can balance safety, liquidity, regular income and tax efficiency.
- One can avoid the annuity plans from Insurance companies as the yields are quite low.
- Avoid investments in physical Real Estate as these are illiquid and earn low rental income.
- Avoid unregulated and get rich quick schemes. There is nothing like high returns and low risk.
- Many people whom you trust love your money and not you. Be watchful.
- Submit Form 15G to the relevant institutions if one is not having taxable income. This will reduce the impact of Tax Deductions (TDS).
- No need to have any life insurance plans. Health insurance plans are mandatory but be wary of the exclusions. Keep liquid money aside for emergencies.
- All money’s belonging to the senior citizen should be invested in his/her name and not transferred to anyone (son/ daughters etc) during their life time. Control on wealth will definitely earn respect.
- Spend well, live healthy, live long and transfer wealth only on one’s demise.
- Have valid nominations and a proper WILL.
We request Senior Citizens to take the services of a professional fee only financial planner who can give unbiased opinion and advice on their personal finances.
Note: Senior Citizens having financial portfolios less than Rs 50 lakhs and not having any other income can have complimentary interactions with us digitally. We will not charge such clients for our unbiased opinions. This is part of our
giving back to the society.
We request you to get in touch with us at 98455 57582 or firstname.lastname@example.org, for further clarifications.
Money cannot buy happiness but one can buy bread and beer from it.
Stay safe, healthy and wealthy!!
- Allocation to listed REIT can be done by investors whose financial portfolio is greater than Rs 1 crore.
- Market linked investments like Mutual Funds and Equity share investments are subject to market risks. Kindly read the scheme information documents carefully before investing.
- Past performance of any asset class is not an indicator of future performance.
- It is very important to consult a Professional Planner/Investment Adviser while implementing any of the above ideas.
- The above are mere suggestions and not Investment Advice as individual cases might differ.
- With the passage of time some of the above tax laws/financial products might change or not be available.
Naveen Julian Rego-CFPCM
SEBI Registered Investment Adviser
17th June 2021