What’s good about this
factored in inflation in his retirement planning should get ready for a life of penury in his later years.
The ultra-safe retirement plan (see graphic) relies solely on income from annuity and debt options that give assured returns. While it is safe from the volatility of the market, it will not be able to match the march of inflation.
What retirees can do
Mutual fund houses, stock analysts and financial planners don’t tire of telling us that equities have the potential to give the highest returns among all asset classes. But as we have seen in the past few months, equities bought at the wrong time and at the wrong price also have the potential to churn out the biggest losses. For a retiree who depends solely on income from his investments, even a small loss can be quite disconcerting.
Even so, retirees do need a dash of equities in their portfolios to help them stay ahead of inflation. They also need to invest in market linked instruments that are more tax efficient than fixed deposits and small savings schemes. Pension income and interest from bank deposits is fully taxable. Senior citizens enjoy a 50,000 exemption on interest income but anything beyond that is taxed at the nor