5 post retirement risks you should know about

Unnecessarily extra focus on liquidity will lead to your entire corpus being parked in bank FDs. Sure liquidity is important and at least a portion your funds must be readily available but this corpus needs to last for 30 years. Therefore, you must consider safe options which offer better returns. Continuing with your PPF by extending it in a block of five years at a time will offer tax free returns of 7.1%. Keep on accumulating by investing Rs 1.5 lakh per annum. Retirees should also not ignore Senior Citizens’ Savings Scheme (SCSS) and the PM Vaya Vandana Yojana (PMVVY), both of which 7.4% interest. Invest Rs 15 lakh each in both schemes.

The second mistake is being overly cautious and investing everything in safe debt. Experts suggest that a small exposure to equity through a diversified mutual fund can increase returns for your portfolio. Remember, you still need equities to beat inflation. Allocate at least 10-20% of your portfolio to equity-linked investments. Equity mutual funds are a good idea and returns are taxed only when above Rs 1 lakh.

While you should not buy and forget retirement products, it is also not a good idea to churn your investments too often. Experts point out that frequent churning tends to lower returns due to exit load payouts in mutual funds and transaction costs in case of direct investments in stocks or bonds. Further, your aggregate wealth will also shrink because of the tax incidence due to churning.