Planning for retirement is not easy, especially, with prices on the rise and interest earned on savings not enough to beat the inflation rate. It is crucial to estimate your retirement corpus requirement by considering your current spending behaviour and nature of expenses calculated in the long run. Moreover, while investing in various financial instruments, many people forego the need to consider the expected returns that the retirement corpus would fetch.
Available Investment Options
A comfortable retired life begets enough savings and money in hand to take care of both essential and cursory expenses. With so many savings and investment options available to today’s investors, many of us wonder if continuing to invest in fixed deposits regularly helps. It is because of the unattractive fixed deposit rates compared to other financial instruments that promise high market-linked returns. These include unit-linked insurance plans (ULIPs), mutual funds (MFs), pension plans, sovereign bonds, Real Estate Investment Trusts (REITs), debentures and the stock market.
Moreover, FDs are not very tax-efficient, which means that one must pay taxes on the meagre returns earned on them. However, a predetermined retirement corpus necessitates stability of returns coupled with low or low risk on the investments made. Opening an FD account to deposit and invest helps in this regard.
How Fixed Deposits Help?
Those unaware of the nuances and availability of the various investment opportunities may choose to open an FD account, thus, paving the way for risk-free investments. Also, capital protection is one of the factors that prompt many investors to look for investment options that promise high stability at the cost of average returns.
Preferred by a majority of the investors, investments in FDs promise guaranteed returns that only increase with time. Cumulative deposits are a great option as the power of compounding allows the money to multiply itself, thus, enabling handsome returns over a period. Lending institutions offer high fixed deposit intrest rates, which one can benefit simply by renewing their FD investments. It means that instead of withdrawing the interest amount earned, it would help investors to set their FDs on auto-renewal, thus, allowing the accumulation of additional interest and benefits through compounding.
The 2019 Budget allows tax exemption for up to Rs. 40,000 for those with regular FD accounts while the exemption limit goes up to Rs. 50,000 for senior citizens. For further tax savings, one may consider paying for a tax-saving CDR worth Rs. 1,50,000 available for five years. Since returns from fixed deposits are predetermined, it helps in further planning of your investment options to achieve your financial goals.
Choose Wisely, Plan Accordingly
While planning a retirement corpus, one must remember that retired people either have zero or low scope of income. The lack of regular income each month forces them to fall back on their savings or earnings made from the various investments they had made. Also, the aged are more prone to diseases that may physically debilitate, thus, necessitating one to create a corpus that would serve them more than pay for their basic needs.