Investment Tips for Senior Citizens

Investment Tips for Senior Citizens

For everyone, decisions on financial investments are becoming a nightmare, at times confusing, scary, fraught with uneasiness. Especially so for retirees where inflow is decreasing year after year and the need to save increases. Here are some practical tips, especially in understanding the broad principles behind parking your funds, from Justice TNC Rangarajan, based on his experience,  as a quote, if I may say so:

I cannot say I have mastered it. I have also lost in mutual fund. I don't think anyone can time the market.I think I have understood the principles underlying investment. The basics are

• Keeping the money at home is loss of interest income.

• So keep some cash for immediate needs and keep the rest in the bank account.

• Now that phone banking with UPI is available, even an emergency fund can be kept in Fixed Deposit linked with zero balance savings account.

• NPS is a must for salaried people.

• PPF is a must for others to generate and accumulate as tax free capital fund. 

• After putting an amount equal to 3 or 6 months expenditure in FD, invest the rest in Equities

• Those who don't mind risk, can open a d'mat a/c and buy shares. It is rewarding, if done regularly.

• Those not into direct investment in shares should try mutual funds. They are easy to invest and easy to take out also. You can get tax free income of 1 lakh per year if you invest in growth option and take out after a year. Those who don't have pension and want a regular monthly income can also use the systematic withdrawal method. The added advantage is that it is easy take out in emergencies within a few days at the price of loss of value depending on the nav. 

• While investing in mutual funds we have various avenues and combinations. Debt funds are less risky with lesser yield while equity funds are more volatile but with better yield than FD rates. Balanced funds are a mix of both. You can create your own balance by investing half your surplus in equity and half in debt funds. But we must remember that mutual funds are riskier than bank FD. However we should not see the nav every day and become moody with the paper loss or profit. Best is to review after each fund has crossed the lock in period and change if required. Tax impact also dictates the way to choose the options to ensure maximum return possible under the circumstances.  

• If you want to be super safe, you can invest in government bonds, where the interest may be a little better than FD rates. Of course, seniors should not miss the Senior Citizen Savings scheme which gives the best interest rates as FD at present but has a lock in period. 

• One thing I have noticed in seniors is that they are often concerned about the facility of taking out the money at any time. I don't know why they always ask about it. One of my friends has two children and bought two houses presumably to bequeath to them. He is living in one and renting the other. Both of them have gone abroad for good and do not intend to come back. The tenant too vacated and he sold that house and told me that he will buy two flats instead. I suggested that he put the money in mutual funds with systematic withdrawal plan as he has no pension. But he said that if he has the money, he will not be able to resist the demands of his brothers and sisters etc and will have the tendency to spend the capital, as he realises that he has no financial discipline. So he believes in only houses and flats as good investment. What to say about this?

• My take on immovable property is that it is not a good investment, unless you are going to live in it. 

===============

I thank him for allowing me to share with you in this blog.

Investing in Stock Markets after retirement

This is an invited article; If there is interest among our readers I shall try to get more such investment advice. Opinions are not mine, please note! Vyasamoorthy

How & Why Should you invest in Stock Markets Even After Your Retirement?

Inflation and Retirement

Most Retirees feel great getting a bulk sum as provident fund and gratuity, and wish they knew a magician, who could spin their money 2 to 3 times in just 5 years, in addition to ensuring a regular return for their day to day expenses. It is true we all want it to keep up with the inflation rate in the market. I know of no such magicians, and it is practically not possible to multiply your money 2 to 3 times in just 5 years. But I definitely know of smart investment planning and investment advisors that could help you to beat inflation.

A step by step look at your considerations to come out with smart calculated investment decisions:

¨ Post-retirement, you know that you would no longer earn a regular income and would have to stay on your savings, provident fund, gratuity, and other benefits that have been given to you. You would definitely want more good returns on your investments, but your appetite for risk is low, for you would not want to lose your precious savings. So you would prefer to shift your portfolio of investment from risky ones to safer ones like fixed deposits in banks and good rated companies.

¨ However your need for more income, capital gains to keep up with inflation, and rates of interest on fixed deposits decreasing each year may make you puzzled about coping up with the increased financial needs. You, as a senior citizen are lucky to be getting additional interest, however taxes leave you with not much more. However you are not prepared to subject your savings to the volatile bullish and bearish trends of the share market of over-confidence and pessimism.

¨ You retire at 60, considering 5% is the rate of inflation annually, with life span as 85, and spending Rs.20000 per month, you would require a retirement corpus of Rs.42,00,000 if the return rate was 8%, while you would require Rs.47,00,000 if the return rate was only 7%. I am sure you would invest smart, reducing your retirement corpus by 10.5% by just investing for 1% more return.

¨ It is true that stocks and shares gave an annual compounded return of 17 to 18% in the last 15 years, with long term stocks giving a compounded returns of about 15 to 18% annually. However you have not appetite for risky and volatile investments, and may want to play safe with low or moderate risk to capital and in not putting all your eggs in one basket or to divide your risk.

¨ After your retirement you would do best to follow the advice of financial experts and invest no more than 10 to 20% of your retirement corpus in shares and stocks. A novice to the share market, or lack of time, inclination or shrewdness may not prove right to deal in the share market, and most financial advisors advice senior citizens to invest in mutual funds. These companies have experienced fund managers and researchers with in-depth knowledge of various industries and valuation principles and also offer diversified investment options in shares in companies, debt instruments and government securities.

¨ The choice of retirees should be to invest in big cap funds, funds investing in huge paid-up capital companies, while mid cap funds suit those who do not mind medium risk-taking. However small cap funds, invested mostly in start-up companies are to be avoided, being highly volatile in nature.

¨ Time plays a vital role in investment in mutual funds, and a good investment advisor would advice you appropriately. The best option for senior citizens would be to first invest a lump sum in a debt based funds that promise good, safe and regular return. This could be followed up by a systematic investment/transfer plan of investing or transferring through ECS regularly a fixed amount for units of a mutual fund. This definitely proves beneficial to take advantage of the volatility of the market, as buying different number of units each month helps to spread the risk also.

A Final Thought:

However your smart calculated investment choice of mutual funds requires evaluating every 3 to 6 months. This would help switching between mutual funds at the right time. My last but most important advice again especially to senior citizens is never go in for stock trading in a big way without proper knowledge and inclination and lose due to volatility of stock and share market.

(The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in )

Senior citizens are also known as ...

Senior Citizens are also known as …

 

As one associated the cause of senior citizens for a number of years I have come across different words that refer to the aged people.  I would like to give a quick run down of a few such terms for the benefit of budding gerontologists as that would help them in literature searches.  Following table lists words and phrases that are synonymous to each other.

 

 

Words denoting Senior Citizens

Baby boomers

Geezers  - An old person, especially an eccentric old man. Derogatory usage

Oldies –a lot to do with appreciation of music of certain period.

Older persons - Government of India's preferred term for senior citizens.

Elders and elderly (respectful)

Senior citizens - Politest term devoid any contempt

Retirees -one who has retired from active life

Retired persons -  One who has retied from active serve

Pensioners - Those who get a monthly subsistence after retirement

Veterans - Ex service men in the USA

Old timer -  used earlier for old people.

Oldster  - slightly uncommon derisive word

Golden ager – just Older person

Ex-servicemen

Senesced -to reach later maturity; grow old

Aged

Ex-servicemen -one who has served the armed forces for a number of years

Old hang – highly experienced old person

Old stager - someone who has seen many battles & wars

 

According to answers.com:  Old is the bluntest of the adjectives most commonly used in referring to advanced or advancing age. It generally suggests at least a degree of age-related infirmity, and for that reason it is often avoided in formal or polite speech. Many prefer elderly as a more neutral and respectful term, but it too can suggest frailty, especially in reference to individuals as opposed to a group or population. And while senior enjoys wide usage as both a noun and adjective in many civic or social contexts, it is often considered unpleasantly euphemistic in a phrase such as the senior couple living next door.

 As a comparative form, older would logically seem to indicate greater age than old. Except when a direct comparison is being made, however, the opposite is generally true. The older man in the tweed jacket suggests a somewhat younger or more vigorous man than if one substitutes old or elderly. Where old expresses an absolute, an arrival at old age, older takes a more relative view of aging as a continuum—older, but not yet old. As such, older is more than just a euphemism for the blunter old, offering as it does a more precise term for someone between middle and advanced age. And unlike elderly, older does not particularly suggest frailness or infirmity, making it the natural choice in many situations.

The world Elder merely means "older than" not necessarily 'old'. But ELDERS and the elderly refer to senior citizens with some respect implied.  Unlike elder and its related forms, the adjectives old, older, and oldest are applied to things as well as to persons.

Baby boomers:  In the US there was sudden (predictable?!) boom in babies after the war. The period 1946 to 1964 witnessed maximum number of births. In the 1990s, approximately 76 million people in the United States were born in the baby boom years, representing approximately 29% of the country's population. America being a market and consumer driven nation took special note of this segment of population for their special needs. Hence the category baby boomers.

It would be interesting to do similar comparisons in other languages as well. If readers have useful inputs they may share it with all via comments.