Most people think that retirement is the end of income stream. You hang your boots and count your days. While that may largely be true, the flow of money need not stop. Here are fourteen ways to make money even in retirement and to keep the bank account buzzing with inflows even while you take time to enjoy the finer aspects of life.
People associate trust and safety with a Bank Fixed Deposit, never mind that banks seems to be in the news for all the wrong reasons. An FD works only for people in the lowest tax bracket, and for those who want to (or need to) visit a bank. However for most people in higher tax bracket this is not so attractive since taxation makes it highly inefficient.
In a Senior Citizen Savings Scheme one gets a slightly higher and regular interest payment and this makes it attractive to retirees. The same tax issues do not make it appealing for those in the higher tax bracket.
Another traditional mode of investment with a reasonably good interest rate. Similar issues of taxation apply.
They generate immediate income and also offer an option for lifetime income. However inflation may reduce the ‘value’ of the income generated. Effective rates of annuity income are comparable to FDs (never mind the marketing) and the income is taxable.
If you can handle the emotion of handing away the title of your home in return for a good cash flow then this is an option. The income is not taxable as it is treated as a loan.
As you build a nice retirement corpus, Mutual Funds are a good way to tap into it using timed Withdrawals that are also tax efficient. You can go for Systematic Withdrawal plans that get you a certain amount on a weekly/monthly basis for expenses. You can also go for the Dividend option though the recent budget changes has increased the tax component a bit with the Equity Dividend Distribution Tax.
The taxation laws are different for Debt Mutual Funds. Here any holding more than 3 years, helps you gain indexation benefit, making the tax quite low. Going for SWPs on a debt mutual funds after they complete 3 years can give a good steady flow of low-tax income.
There are many to choose from. Tax free bonds are a good option and the income they generate is tax free. Go for Government of India or PSU Bonds that are tax free. Gold Bonds issued by the government or Gold Mutual Funds are also an option here yielding some income and providing that hedge against inflation.
The National Pension Scheme is an option that allows you to either withdraw the corpus partially or by converting it into an annuity. It is best to withdraw the corpus over years to optimise for taxes.
A tax free way of enjoying income is to tap into the account and keep the cash flow coming. Those who are lucky enough to accumulate a large corpus of PPF can time their withdrawals during retirement years to enjoy tax free income.
This is similar to Equity Mutual Funds in terms of taxation. For those who are savvy enough to invest in direct equities, this is a good source of regular dividend income. An asset allocation in line with the risk profile in the later years is recommended.
The traditional way of the landlord still works. While rental yields may be low, this is still a reasonable way to get inflation adjusted income. An alternative is to invest in Real Estate Investment Trusts (REITs) and enjoy the cash flow.
As urbanisation deepens, the demand for quality farm land will increase as well to feed the swelling populations. Farm income is tax free and can also offer a nice way to spend those yonder years in an idyllic scenario.
You may still have a lot of energy left to unleash the wealth of experience you have built up over decades. Many experts are still called upon to consult on a part time basis or offer other services which provides both an avocation and decent income. Examples include IT Consultants, Business Consultants, Tax Auditors.
Who said that you cannot do something that makes you deeply satisfied and also offer something of value to the people around who are willing to pay for the offering. The objective here is not to ‘make money’ but do something of value. Examples include blogging, book keeping for a temple or NGO, teaching Yoga, music classes etc. That money need not hit your bank account; it may reach your favourite charity leading to satisfaction that is priceless.
There is life beyond the rat race and for those who retire into their sixties, or even those who ‘retire early’, there are enough things to do! Yes money flow cushions retirement years and takes out stress and makes those years even more enjoyable!
Happy Investing !
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