Should people about to retire invest in ELSS?

I am only a couple of years away from retirement. Should I still invest in ELSS to save taxes under Section 80C? Wouldn't it be better to opt for a fixed-income-based alternative?
- Subhash

It entirely depends on your situation. If you receive pension after retirement which is sufficient enough to meet essential expenses, then you should continue to invest in ELSS with a long-term perspective.

On the other hand, if you are not likely to receive pension and plan to consolidate all your savings at one place and then work on a withdrawal plan of 4-6 per cent to meet your essential expenses. In that case, do not invest in ELSS. It has a lock-in period of three years but three years anyway is a very small duration for investing in equity. So, it depends on your situation.

But when you work on a withdrawal plan, remember that equity is important even after retirement and one must allocate at least one-third of the corpus to it in order to get inflation-beating returns in the long term.

This article was originally published on March 10, 2021.