5 Best Tax Saving Investments for Your Retired Life

— Published on: May 25th, 2020

Life after retirement can be difficult if you do not have any form of financial security in the form of long-term tax saving investment options.

Once you retire, the chances are that your source of regular income dries up.

Subsequently, you would have to depend upon your savings to support your life after retirement. It is crucial, thus, that you invest in different tax saving investment options during your working years.

By investing in popular tax saving options such as ULIPs, you can create substantial savings to fulfill your retirement dreams. It is here that having a solid financial plan can help provide a reliable source of income that comes into play.

When planning for your retirement, you should start by investing in tax saving investment options. Your post-retirement portfolio should be a mixture of fixed income and tax saving options.

Tax Saving Investments for Retired
Tax Saving Investments for Retired

This investment portfolio is one of the biggest challenges faced by people who are going to retire. The idea is to build a portfolio of retirement with a combination of various tax saving investment options. Here are the best tax saving investment options for the retired people:

1. Senior Citizens’ Saving Scheme (SCSS)

The Senior Citizens ‘ Saving Scheme (SCSS) is one of the best tax-saving investment options. The scheme is available only for senior citizens or early retirees.

When opening an account with any post office in India doing Savings Bank work and authorized by Director General Posts, you should be the age of 55 or more but less than 60.

The interest rate in Senior Citizens’ Saving Scheme currently stands at 8.6 percent per annum, payable annually, and fully taxable. The benefits of investment plans such as SCSS are that the rates are set every quarter and are related to the G-sec rates with a range of 100 base points.

Once you have invested in it, the rates remain the same for the entire tenure, which makes it the best tax-saving investment instrument.

It offers the highest post-tax returns among all the taxable products.

2. Post Office Monthly Income Scheme

Post Office Monthly Income Scheme is one of the standard five-year tax saving investment options, which offer options for single ownership as well as joint ownership with a maximum cap of Rs. 4.5 lakhs and Rs. 9 lakhs simultaneously.

The interest rate is set every quarter and is usually payable annually at 7.8 percent per year. The contribution of this tax-saving option is not liable for any tax benefit, and the interest is taxable.

The money can be credited directly to the savings account of the same post office, instead of going to the post office every month. Also, one may provide the mandate to move the interest from the savings account automatically to a regular deposit in the same post office.

3. Bank Fixed Deposits

Another popular choice of tax saving investment options with the people nearing retirement is bank fixed deposits (FD). The fixed returns of these tax saving investment options with the retirees go well, and the ease of operation makes it a secure avenue.

The interest rate has, however, been declining over the last few years. For tenures ranging from 1-10 years, it currently stands at about 7.25 percent per annum.

According to the government, senior citizens get an additional 0.25-0.5 percent per annum. Few banks offer seniors about 7.75 percent on longer-term deposits. Unlike the Senior Citizens’ Saving Scheme and Post Office Monthly Income Scheme, debt deposits provide tenure flexibility.

4. Life Insurance Policy

A life insurance plan needs to be the foundation of any solid retirement plan if your family depends upon your retirement income. With life insurance, you can make full use of your funds to support your portfolio or any other post-retirement goals.

First, investing in a life insurance scheme allows you to secure the future of your family at a nominal cost against any financial crisis. You will then be free to invest in other assets and optimize your savings with the returns.

A life insurance policy can help provide a significant corpus to replace any loss of income or tackle medical emergencies. It is, no doubt, one of the best tax-saving investment instruments.

5. Tax-Free Bonds

These are fixed-income long term products with a 10 to 15-year lock-in. The value you get isn’t being paid. When you sell the bonds on stock exchanges where they are traded, though, you must pay tax on capital gains. The discount or interest rate is typically less than that offered by bank-fixed deposits of equivalent length. However, the tax-free income that they generate makes them attractive to investors in higher tax brackets.

A Sound Financial Portfolio to Protect Your Future…

Now you don’t need to consider anymore on topics like which are the best tax saving investment options for retirees. If you’re considering investing your money that has a standard deduction for senior citizens, then the choices mentioned above could be the best targets for you to stop-think-invest. Life insurance plans from reputable insurers like Max Life Insurance are some of the best tax-saving investment options that help you create the best possible financial security net for your family. So, please don’t put it off; take the first steps today for a financially secure retirement.

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About AtulHost

Hi, I'm Atul Kumar Pandey; also known as AtulHost on the web, a blogger by profession with an objective of sharing fresh and real contents in the business and technical topics; from contents to useful resources it's all here.

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