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Retirement Funds

A reader questions as to whether his father's decision to put all his retirement savings in a fixed deposit is a wise move or should he consider other investment options also

My father retired in December 2006. He received his post retirement benefits worth Rs 8 lakh. He intends investing the entire amount in a fixed deposit. However, I do not agree with such a move, since I have personally invested in equity funds (dividend option) and feel that he should also invest in mutual funds. Could you recommend some good investment options for him?
-Laxmikant Kolapkar

Capital protection seems to be a priority in your father's case and therefore, it would not be appropriate for him to invest in equity funds. Alternatively, he can invest a part of his savings in a couple of monthly income plans (MIP) of mutual funds. These funds invest primarily in debt based instruments and maintain a small exposure to equities in the range of 5-20 per cent. Obviously, the returns on these funds are no where as impressive as predominantly equity funds, but they should suit your father well, given that they provide limited participation in equities with a moderate amount of risk.

He can also consider post office's Senior Citizen Savings Scheme. This investment avenue is available to people of 60 years or above, and carries a handsome interest of 9 per cent per annum (taxable), paid quarterly. A Senior Citizen Account can be opened through any designated post office throughout the country, either individually, or jointly (with spouse only). Only one deposit is allowed in an account and you can open more than one account subject to a maximum of Rs15 lakh.

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