Once you retire, the first thing you need to plan for is the amount of funds that you need immediately. For example, you may want to encash certain investments and move to a different city. Further, you may also want to add some conveniences to your life. These could include buying a larger television or applying a fresh coat of paint to your house. Let’s have a look at how you can go about funding your cash needs when you retire.
If you have invested wisely, you will have several types of investments, ranging from real estate to fixed deposits.
Here is a look at which investments you could convert to cash:/
1. Residential Property:
Selling residential real estate attracts capital gains tax. You can tackle this by reinvesting the earnings into another residential property for a short term. This manoeuvre is useful when you need to sell your current residential property and buy another property. This can mean selling your house in a metro and purchasing a holiday home somewhere more quiet and peaceful. Do remember that selling a property is a big move, so make this decision if you feel that it is right for you.
2. PPF Accounts:
When you retire, your PPF account will mature. This is another method to fund immediate needs. Moreover, these gains don’t attract any tax at maturity. It is a good idea to transfer the balance PPF amount to a small- or medium-term fixed deposit. This will help you further multiply the money to fund your daily needs.
3. SIP and Equity Investments:
These tools are known for their high returns. So if you’ve invested early on, you would have gained a substantial amount over the years. As you plan your retirement, it is ideal to withdraw your money from these investments and use them for immediate requirements. You can also reinvest these funds in a low-risk assured investment such as senior citizen fixed deposit. In case the stock market is in a slump, it is advisable to liquidate your other investments before you cash in your equity investments. This way, your investment will get a chance to recover.
4. Fixed Deposits:
This safe investment is ideal for senior citizens as it provides high security and considerable returns. Additionally, interest rates on senior citizen fixed deposits are higher than regular fixed deposit accounts. Fixed deposits also allow you to get easy access to your money on a short notice. You can choose to invest in a cumulative FD to get monthly or quarterly pay-outs to use for daily living expenses too.
For example – Bajaj Finance is a leader in personal finance and offers a Senior Citizen Fixed Deposit Scheme. While their other customers get an interest rate of 7.85%, senior citizens are offered 8.10% interest. You can deposit a sum as little as Rs. 25,000 in this FD which has been awarded with CRISIL’s FAAA/Stable rating.
5. Investments in Other Property:
Investments in an office space, or any other property that yields rent is a good asset to hold on to. This ensures regular income to fund your retirement. Moreover, the excess money can reinvested in other low-risk options.
At the time of retirement, it is a good idea to rework your monthly requirements. As they reduce significantly, you can revaluate your financial needs and create a plan for yourself.