What Should Retirees Do In Falling Interest Rate Regime?

As many as 5 banks both in the private and public space have lowered their interest rate offering on savings account down by almost 50 basis points. 1 bps is 1/100th of a percentage point. Also, FD interest rates are hovering anyway between 6-7%. So, despite inflation rate getting lowered, cost on the whole for a common man is seeing no stability and is rising regularly.

What Should Retirees Do In Falling Interest Rate Regime?

So, options for people in the retirement age or who have already retired are few but can boost their income substantially in comparison to conventional investment instruments. Balanced Funds-These invest a sizable portion in debt funds and hence have the power to offer returns far better than FDs as these provide for some fixed return owing to investment in fixed income securities. SCSS- The SCSS offered by both public-run and private sector banks is a five year scheme which can be extended by another three years time. A quarterly interest that is payable @ 8.3% pa. But the drawback of the scheme is its maximum investment limit of Rs. 15 lakhs. 

Debt Mfs- As they invest in debt papers which are traded so no guarantee of fixed returns but returns are at par with the markets and hence better than FDs. For steady income stream, one can opt for SWP from a debt MF scheme. Post Office MIS- Monthly income option is favoured by many and is with a term of 5 years. The maximum investment in the instrument is capped at Rs. 4.5 lakh and the income from it is taxable in the hands of the investors.

 PPF- For decent returns, investors can even consider PPF which currently offers a return of 7.9%. But the disadvantages of the instrument can also not be overseen such as its illiquid nature, no regular pay out option and investment limit of Rs. 1.5 lakh in a year. 

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