Debt or fixed income investments are an integral part of any retirement corpus. This portion is meant to be safe and bring stability to the overall investment portfolio. The investor essentially acts as a lender when they choose fixed income products. So, debt investments should be made with the intent of securing hard earned money to provide for your golden years.
There are a variety of fixed income investments to choose from. The most prominent are outlined below:
1. Provident fund
Both self-employed and salaried individuals can invest in a provident fund through the PPF or EPF/VPF. These investments offer a guaranteed rate of return and are supposed to be supported by the government. They carry virtually no risk.
2. Retirement Benefits
Retirement benefits like gratuity and pension are usually provided to salaried workers by their employers. Self-employed individuals may choose to independently invest in the NPS or purchase annuity products to earn a pension post-retirement.
3. Debt Mutual funds
There are many categories of debt funds and categories need not always have a narrow mandate. Effectively, two funds within the same category may vary from one another in many ways. A professional advisor could help you select funds that are suited to your needs.
Investors often choose to keep bonds as a part of their retirement corpus as the interest earned acts like income. Government bonds are usually considered failsafe, but there are many high-quality corporate bonds that could fulfill these needs.
Fixed and recurring deposits are household investment options. Almost every retiree has some money stashed away in them. As deposit rates have been on a decline many conservative investors are exploring alternative investment options.
No retirement corpus is complete without a debt component. The percentage of debt is dependent upon the level of income required and the risk profile of the investor. It is crucial that your hard earned money is deployed effectively towards meeting your retirement planning objectives.