When planning for your retirement, it's best to start early. The reason is you will not have a source of fixed income once you retire. So, you need to make investment plans that will help you continue with your expenses without worrying about your finances. But with inflation and sky-rocketing healthcare expenses, solely relying on your savings for retirement might not be enough. If you're risk-averse and want to invest in a safer financial instrument, then you should consider opening a fixed deposit.
With a fixed deposit, you can effectively grow your wealth and build a strong corpus for your future. It comes with a higher interest rate than a regular savings account and offers several other benefits such as assured returns and high stability. Here's how investing in fixed deposits can help you plan for your retirement.
Low Risk with Guaranteed Returns
FDs are among the most popular investment instruments, as they are not connected to the money market. This means that your investment is secure and you will receive the promised interest rate on your investment. You can use an online FD interest calculator to determine how much interest you will earn on your deposit for a specific duration.
Higher Interest Rate Than Savings Account
Fixed deposits generate higher ROI than savings accounts. FDs attract an interest rate of 3%-6% p.a., depending on the tenure and the deposit account. Moreover, senior citizens can get 0.25%-0.75% additional interest over the regular interest rate. A savings account, on the other hand, only offers 2%-4% in interest p.a.
Convenience
Accessing your income from multiple investment sources after retirement can be complicated. Fixed deposits can simplify your retirement planning as they are easy to open and track. And not only that. Most banks offer a flexible tenure ranging from 1 to 5 years which ensures higher liquidity. All you have to do is deposit your money and you will receive a fixed interest on it. With the digitisation of the financial sector, you can open an FD online in a few simple steps.
Get Loans Against Your Investment
If you're in a financial emergency and urgently need credit, you can use your fixed deposit as collateral to avail of a loan. You can get a loan of up to 95% of your deposit amount, but this percentage varies from bank to bank. This helps you become financially independent and deal with unexpected events without dipping into your savings.
Tax Benefits
Under Section 80C of the IT Act, senior citizens can invest in tax-saving FDs to avail of a tax exemption up to Rs. 1.5 lakh. This lets you enjoy both – a retirement corpus and tax benefits. But these FDs have a lock-in period of 5 years and most banks do not allow early withdrawals or loans against them.
Final Thoughts
After all the hard work you've done over the years, you don't want to depend on your children for financial aid. Fixed deposits are an excellent instrument to grow your wealth and guard it against market fluctuations. They not only help you prepare for the future but are an invaluable asset in times of an unforeseen crisis. Moreover, before opening an FD, make sure you evaluate your income, requirements, interest rate, tenure, etc., to avoid any inconveniences later.
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