Many people worry about retirement planning in india thinking it’s a full stop on money making, and all they do is worry. They fail to take any necessary action. Retirement planning sounds like a big task. Why does it sound so scary is because we all know that after a point i.e. Retirement we’ll stop making money. But is that actually true? Does retirement actually stop you from making anymore money? Well, not in all cases. Infact retirement also doesn’t mean 60, it can mean 30 too.
Here is one inspiring story of a man, Tarun Sharma, who took an early retirement at age 28 with a nest egg of 5 crores.
Surprisingly, he continued to generate income after retirement, earning more than 30lc in one year, putting in less than five hours a week of work. He was able to do this by monetizing his passion for photography. He took up select but highly paying clients and worked less hours to make good amount of money.
But initially taking care of the basic expenses was a challenge, which he overcame by using the power of passive income coming from existing wealth. Passive Income is the best way to continue earning even after retirement, so that you can work for pleasure not money. At least, that’s the case for Tarun Sharma, who retired at the age of 28 wanting to live with passion, following his purpose rathar than running after money, all of his life like everyone does.
But to his surprise, following the passion matter good amount of money asking side passive income coming from existing wealth.
Tarun Sharma had his own ways of making passive income. Not everyone has the same skill-set but what almost all of us has is a wealth corpus which we can use to make more money as leaving idle is no reward and helps none.
For people nearing old ages and standard retirement, there are so many asset classes that one can invest in after retirement. Some of them are :
1. Senior Citizen Savings Scheme
This option is overlooked by many, but it is actually a very interesting way to invest. SCSS is a government initiative to give income quarterly to people who have either crossed the 60 age mark or have taken voluntary retirement at 55. Currently at 7.4% interest rate (paid quarterly), it comes with a 5 year period which can be extended to another 3 years on maturity.
2. Government Bonds | Quasi Bonds
Owing to what the current financial weather is, it has become very risky to invest in debt funds. However, investing in government backed bonds like RBI bonds, Quasi Bonds like REC, IRFC, PFC, etc. are some great instruments available for any conservative investor (those who do not want to lose their capital at any cost, low risk takers), not just to people nearing retirement. The gross interest rate (before taxes) on the same are currently around 7% (approx.). Another way to avail the same is investing through Bond of ETFs which consists of government backed companies and sovereign bonds only.
3. National Pension Scheme
One of the easiest ways to create annuity for people nearing retirement is adding money in NPS which offers the choice to further diversify investments in Equity, Government or Corporate Debt. An interesting taxation aspect about NPS is that it allows for an additional tax benefit to invest another Rs50,000 on top of your existing 80C limit of Rs1,50,000. This is more beneficial if you are a central government employee.
4. Public & Employee Provident Fund
PPF is one of the most preferred options of many people nearing retirement as it comes with guaranteed returns backed up by the government. However one can also consider EPF which allows for a higher rate of Interest 8.55% Vs 7.1% of PPF. One totally amazing feature of EPF is that the employer also makes an equal monthly contribution as the employee doubling the capital invested for the individual.
However it is important to note, that money should also be well diversified into mildly aggressive assets like index funds which can create a double digit growth without very high risk over the long term.
Hence, retirement planning in india is easy if you use the power of passive income, it is not a full stop to making money. In fact, it is the start of a life where you live your purpose and get paid handsomely for it while you already have passive income from your wealth supporting your day-to-day needs.
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