How to select a safe investment for retirement

Thinking about starting your retirement fund? Here we tell you what is the safest investment for retirement and how to invest retirement money.

While considering where to invest money in India, you also need to factor in what is the safest investment for retirement. There are many viable options available according to different requirements. When it comes to investments made towards creating a post-retirement corpus, safety is much more important than the returns. However, that doesn’t warrant a decision of picking one of the supposedly ‘safe’ investments and putting all your funds in it. Factors like timely maturity, sufficient liquidity, and future value are just as important as safety when picking the best investment options for senior citizens. 

1. Assess your available fund 

Out of the available income, you have to budget the amount which can be spent, and the amount that can be saved or invested. Savings is a short term concept. Investments are long-term commitments with better returns where we could choose to take risks in order to earn more out of them. There is no thumb rule for the amount which can be invested. The only golden rule is to save first, then invest. Once we commit to the investment, there can be no turning back, because there are lock-in periods and maturity periods involved. Therefore, assessing the ratio between spendings, savings and investments is very crucial.

2. Balancing risk and safety 

Not all investments are the same. Investments are often a function of risk and reward. The returns increase with the amount of risk that one is ready to take. In our quest to find the safest investments, we have to consider the yield that we are getting out of our investments. By putting all our funds in safe investments, we will lose out on the returns. By going for investments with high returns, we may earn more, but will remain perilously exposed to risk. Striking a balance between safety and returns is not always a calculative or financial decision. It may be situational too. For example, if your job is not very secure, the best way to invest money would be through safe investments. Otherwise, you might want to invest in, say, some of the best stocks to buy in India for short term and see how the investment performs.

Related: Tax Benefits after Retirement

3. Identify safe investments 

Want to know what is safest investment for retirement? It is not very difficult to find safe investments. There are bank fixed deposits, savings account, government-backed saving options etc. which offer limited returns, but are considered safe. Fixed deposits can get you anywhere between 5-9% interest on investment per year, depending on the bank. It is one of the best investment plans with a lock-in period ranging between 30 days and 10 years. If you have assurance regarding the duration, then safe instruments like National Saving Certificates can be considered.

4. Safety of safe assets

To answer what is a good retirement fund,several investment options in India are considered safe, but there are some risks involved with the safest of investments. There is always a possibility that you may lose the investment itself, but that is less likely with safe investments. There is a risk that the return on investment may not be able to meet the inflation rate. You wouldn’t want your investment actually to lose out on purchasing power after your retirement. Then again, if your safe investments are locked down in a long-term scheme, they lose their liquidity entirely, making them unusable even in emergencies. The timing of their maturity should align with your retirement plans. These factors must be considered while choosing the right safe investment.

5. Return from safe assets

There was a time when government-backed NSCs used to double every five years. Now you get Rs 140 after five years for every Rs 100 invested in NSC at a yield of 6.8% per annum as of June 2020. While ensuring the safety of the funds, we are compromising on the return. Therefore, an assessment of the expected return is also essential. For your retirement, you should go for the best investment plan with high returns, without compromising on the safety. For this, you have to identify safe investments, as well as find out where to invest money in India for maximum returns and compare both the options.

Related: Investment options that are popular among retirees 

6. Retirement based investment 

While all the above points do consider retirement planning, it is important to remember that the investments should commensurate with the needs of the retired life. Apart from making safe investments and protecting them for use during the post-retirement life, the probable requirements at that stage of life should also be considered when determining how to invest retirement money, and said investments should be made accordingly. For example, if the safe investments meet the targeted retirement corpus, the next goal should be to identify where to invest money for good returns in India so that returns can be maximised. It could be money market accounts or debt funds with good yield in the short-term. 

Taking or not taking a risk is dependent on the extent to which you are willing to come out of your comfort zone. Besides, investment decisions should also align with the financial goals and the road-map of the person. Have a look at five must-have investment instruments for retirement planning, since when chosen wisely, safe investments can help a person protect his or her fund while bringing in a decent yield for post-retirement life. Also, use this retirement calculator to check how much you need to save to ensure smooth post-retirement life.