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Retirement Planning for Women: FD For Long-Term Stability

mahindra-finance-author

by Mahindra Finance

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May 7, 2024

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5 mins read

Introduction

Planning for retirement is crucial to ensure financial stability and a comfortable standard of living in the future. According to a recent survey, 62% of individuals earning between INR 50,000 and INR 75,000 have a retirement plan in place. When it comes to retirement planning, one of the most effective financial instruments is a fixed deposit (FD). In this article, we will explore the various ways in which FD's can help women secure their long-term stability and prepare for retirement.

Investments for retirement

Investments are an essential aspect of retirement planning. They not only provide growth opportunities but also offer tax-saving benefits. By strategically dividing your income between savings, investments, and expenses, you can secure your financial future and enjoy a worry-free retirement. Fixed deposits, particularly those offered by Non-Banking Financial Companies (NBFCs) like Mahindra Finance, offer higher interest rates compared to traditional banks. This allows you to grow your wealth at a faster pace.

Here are some reasons why investments like fixed deposits should be a part of your retirement plan:

  1. Tax Planning: Proper planning of long-term investments such as fixed deposits allows you to save on taxes every year. By exploring various deposit options and utilising tools like the fixed deposit interest calculator, you can optimise your tax savings while securing your future.
  2. Higher Interest Rates: Some fixed deposits schemes yield higher interest rates than others. It's important to consider these options and choose the one that aligns with your financial goals.
  3. Diversification: It is unwise to tie all your funds in a single investment. By diversifying your investments across different fixed deposits with varying maturity periods, you can minimise risk and ensure steady returns. This strategy, known as laddering and stacking, allows you to have greater control over your finances and avoid any potential losses.
  4. Financial Independence: Relying solely on your children as a retirement plan is not ideal. The popularity of fixed deposit schemes for senior citizens has proven that having multiple options is essential for a secure retirement. By investing in FDs, you can ensure financial independence and meet your retirement requirements without depending on anyone else.

Sufficient Amount for Retirement Planning

Determining the right amount of money for retirement planning is not an exact science due to inflation and rising prices. However, a common approach suggests setting aside up to 80% of your annual pre-retirement salary for post-retirement expenses. This calculation provides a base for estimating the corpus required to maintain a healthy lifestyle during retirement.

Apart from fixed deposits, other investments like real estate, gold, mutual funds, and Systematic Investment Plans (SIPs) can also contribute to your retirement fund. It's important to diversify your investments based on your risk tolerance and financial goals.

Why Fixed Deposits are Ideal for Retirement Planning

When it comes to planning for retirement, fixed deposits offer several advantages that make them an ideal choice:

  1. Security: Fixed deposits are safe investments that guarantee returns. Unlike investments tied to money markets, FDs provide a fixed interest rate throughout the tenure of the deposit, ensuring stability and peace of mind.
  2. Loan Against Deposit: In case of emergencies or unexpected expenses during retirement, you can avail of loans against your fixed deposit as collateral. This feature ensures financial independence and helps you cover expenses without any stress.
  3. Meeting Daily and Long-Term Expenses: By choosing the right term deposit, you can easily plan for daily expenses as well as long-term financial goals.
  4. Easy Monitoring: Fixed deposit schemes are simple to monitor. With online access to a dashboard where you can track maturity dates, renewals, and interest rates, managing your investments becomes convenient and hassle-free.

Types of Fixed Deposits

Fixed deposits come in two types: cumulative and non-cumulative.

  1. In a cumulative fixed deposit, the interest gets compounded along with the principal amount. This type of FD is suitable for individuals who have other sources of income and want to maximise their returns over a longer period.
  2. In a non-cumulative fixed deposit, you receive regular interest payouts at monthly, quarterly, or annual intervals. This option is ideal for those who prefer a steady stream of income during retirement to cover daily expenses.

Conclusion

Retirement planning is a crucial step towards securing your financial future, and fixed deposits play a vital role in achieving long-term stability. By investing in FDs offered by reputable NBFCs like Mahindra Finance, you can enjoy higher interest rates, guaranteed returns, and financial independence during retirement.

Remember to diversify your investments across different fixed deposits with varying maturity periods to minimise risk. Utilise tools like the fixed deposit interest calculator to plan your investments effectively. Start planning early and make smart financial decisions today to ensure a comfortable retirement tomorrow.

FAQs

Q: What is the minimum tenure for a fixed deposit?

A: The minimum tenure for a fixed deposit varies depending on the bank or NBFC. It can range from 7 days to 10 years, giving you flexibility in choosing the duration that suits your needs.

Q: Can I withdraw money from a fixed deposit before maturity?

A: Yes, you can withdraw money from a fixed deposit before maturity. However, there may be penalties or reduced interest rates associated with premature withdrawals. It's best to check the terms and conditions of your specific FD scheme for more details.

Q: Are FDs taxable?

A: Yes, the interest earned on fixed deposits is taxable as per the income tax slab applicable to the individual. It is important to consider this while planning your investments and estimating returns.

Q: How can I calculate the interest earned on my fixed deposit?

A: You can use a fixed deposit interest calculator to determine the interest earned on your investment. Simply enter the principal amount, tenure, and interest rate to get an estimate of your returns.

Q: What happens if a bank or NBFC offering FDs goes bankrupt?

A: In case of bankruptcy, deposits up to INR 5 lakhs are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). This ensures that your investment is protected even in such unfortunate circumstances.

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