The ultimate portfolio for a retiree

In our previous part, we see how falling interest rates affect the income of retirees. In order to tackle the problem of falling interest rates, retirees need to build resilient portfolios instead of simply depending on fixed deposits for their income. Fixed deposits prove to be highly inadequate instruments for generating a fixed income, and in the context of falling interest rates the problem is even worse. Equity is the only solution. But retirees need not move their entire corpus to equity, but instead maintain a careful allocation between fixed income and equity in order to grow their corpus, while also not taking on too much risk. Fixed-income alternatives When it comes to the fixed income part of their portfolio, retirees should look beyond fixed deposits. They should consider switching to the Senior Citizens Savings Scheme (SCSS) or the Pradhan Mantri Vaya Vandana Yojana (PMVVY), which at present are offering 8.6 and 8 per cent, respectively. While the PMVVY comes with a lock-in period of 10 years, the SCSS has a tenure of five years, which can be extended for three years. The Post Office Monthly Income Scheme (POMIS) offering 7.60 per cent is another option. There is however an upper limit to how much you can invest in such schemes. Secondly, the rates offered by these instruments may face the axe as well since they are subject to market-linked revisions

This article was originally published on January 01, 2020.