What are the investment options available for regular income?
A decade or so ago, when someone wanted regular income, you assumed they were senior citizens or had retired early. That is no longer the case. With many shifting from a salaried existence to freelancing or enterprise, the need for regular income from accumulated wealth as a cushion has become important.Let us discuss the investment options available for this purpose. We assume the person has a corpus to invest and obtain regular income. We exclude options like rental income (not possible/practical unless the property existed before), stock dividends (not possible unless the portfolio is old and significant), and systematic withdrawal plans (which will erode the principle and may not always be suitable).1 Senior Citizen Savings SchemeAs the name suggests, one must either be 60 years or above on the account opening date or 55 years or more but less than 60 years and have retired under Superannuation, VRS or Special VRS. Retired Defence Services personnel (excluding Civilian Defence Employees) may open an account upon attaining the age of fifty years.The interest payout is quarterly, and the maximum investment limit is Rs. 30 lakhs per person (so a couple can invest Rs. 60 lakhs). The downside is that the tenure is only five years, and the interest will differ upon renewal. This has a sovereign guarantee.2 Post Office Monthly Income SchemeAnyone can buy these. The payout is monthly. The maximum amount in a single account is Rs. 9 lakhs and Rs. 15 lakhs in a joint account. The interest would be lower than the senior citizen savings scheme. The duration is again five years. This has a sovereign guarantee.3 Fixed Deposits Monthly Income SchemeBanks and financial institutions issue these. The guarantee in the case of banks is limited to the deposit insurance limit and not applicable to financial institutions. The higher the rate offered, the more wary buyers should be.4 Insurance Immediate Annuity PlansThese come with many options – How Annuity Plans Work – and anyone above 35 or 40 can opt for these. Unless the person is a senior citizen or has a small corpus to work with, these are not recommended before retirement. The higher the age of entry, the higher the interest rate. So it would be favourable to buy these well into retirement.It must be remembered that the option favouring the insurer will have a higher interest rate. For example, they get to keep the initial corpus upon the death of the subscriber. Also, see Higher annuity rates of LIC Jeevan Akshay applicable from Feb 2023. 5 Government Bonds via RBI Retail DirectRBI Retail Direct – a facility that allows retail investors to open a gilt security account with the RBI and purchase government securities (gilt bonds or gilts) in the primary and secondary market without a fee – was launched on Nov 12 2021.Retail investors can buy bonds in the primary market (after a bond is issued) via a process known as non-competitive bidding. When RBI announces G-secs, banks and institutional investors (big players) determine the price in an auction. While retail investors can now participate in this auction, they cannot bid for these bonds. The bids of the big players will decide the price allotted.RBI Retail Direct allows the sale of the bonds mid-tenure via CCIL India’s NDS-OM (Negotiated Dealing System – Order matching segment). The entire process of registration and use is completely online and can be linked with a savings bank account. RBI has published the full scope of RBI Retail Direct.Also see:Bonds vs. Annuities.Bonds pay interest twice a year and not monthly. Such a cash flow pattern may not be suitable for some. Annuities require proof of life each (life certification), while bonds do not need it.Bonds always return the principal to the self or nominee, while annuities provide a choice. The pension from the return of purchase price option is considerably lower!So, you will have to pay the insurer more to get the same pension as a bond or a simple annuity for life if you want the principal back.At a young age (how young depends on prevailing yields and rates), bonds may offer a higher income than annuities. Older retirees may get a better deal with annuities. See: What are the annuity rates of LIC Jeevan Akshay VII from Feb 2022?Annuities are subject to 18% GST, while bonds are not.Both options are illiquid. That is, you cannot get your money back after you have purchased a bond or an annuity (certain choices). At the time of writing, RBI Retail Direct purchases will not show up in your demat account for sale in the secondary market. Even if it does in the future, the retail bond market is immature and getting a buyer at the price we want would be tough.Bonds can be held jointly with the spouse. This ensures income to the younger spouse (assuming the bong has a long enough tenure). Annuities offer income for the lifetime of the surviving spouse.A retiree can consider buying a bond for the first annuity if it offers a higher yield and then buy single/joint annuities (simple choices as mentioned above) after a decade or so when the rates would be higher.In summary, younger retirees or income seekers can consider RBI bonds. In contrast, senior citizens can consider a mix of traditional income-generating instruments and bonds, depending on the corpus size. Do share this article with your friends using the buttons below. 🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users! Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this! Track your mutual funds and stock investments with this Google Sheet! We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.Follow Freefincal on Google NewsSubscribe to the freefincal Youtube Channel.Follow freefincal on WhatsApp Podcast: Let’s Get RICH With PATTU! Every single Indian CAN grow their wealth! Listen to the Let’s Get Rich with Pattu Podcast You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.Let’s Get RICH With PATTU podcast on YouTube. 🔥Now Watch Let’s Get Rich With Pattu தமிழில் (in Tamil)! 🔥Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincalHave a question? Subscribe to our newsletter using the form below.Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)About The Author Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice. Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence. Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos! Our new book for kids: “Chinchu Gets a Superpower!” is now available!Both the boy and girl-version covers of “Chinchu Gets a superpower”. Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!Feedback from a young reader after reading Chinchu gets a Superpower!Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun. Buy the book: Chinchu gets a superpower for your child! How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only! Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool! We publish monthly mutual fund screeners and momentum, low-volatility stock screeners. About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters at freefincal dot com (sponsored posts or paid collaborations will not be entertained) Connect with us on social media Our publicationsYou Can Be Rich Too with Goal-Based Investing Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)
