5 Ways in Which Fixed Deposits Help in Retirement Planning

Fixed deposits offer good returns with low risk, making them a popular choice for many investors. They also help you invest safely for various goals, including retirement. In fact, financial institutions offer various benefits that make FDs an attractive option for retirement planning.

There are many ways in which FDs help you invest easily for retirement and ensure that you can enjoy your golden years without any financial stress. These range from attractive interest rates to tax benefits and more.

Read on to better understand how fixed deposits can help you plan for retirement.

5 Ways in Which FDs Help in Retirement Planning

Fixed deposits offer a host of features and benefits that you can leverage to ensure a stress-free retirement. Some of these features are:

High FD Rates and Returns

Interest rates directly impact the returns you earn from your deposit. As such, higher interest rates translate to higher returns. These will, in turn, increase your earnings at maturity, helping ensure you have sufficient funds. 

When it comes to FDs, issuers generally offer higher interest rates to senior citizen investors as compared to non-senior citizen investors. If you look at Mahindra Finance FD rates or any other issuer’s FD rates for senior citizens, you will see that they are around 0.50% to 1% higher. 

While the difference may not seem like much, it has a significant impact when you factor in a substantial investment amount. For instance, consider an investment of ₹10 Lakhs for 5 years at the rate of 8.05% for regular investors.

In this case, the matured amount is ₹14,72,732. However, if this rate increases to 8.30% for senior investors, you can earn ₹14,89,849. This is an increase of more than ₹17,000.

Secure and Stable Returns

Fixed deposits are non-market-linked investment avenues and, as such, have zero to very little risk. This is greatly beneficial when you are investing for your retirement, as your risk capacity usually reduces with time. After all, as you approach retirement, your earning ability decreases, and your medical expenses are likely to increase.

However, whether it is Mahindra Finance FD rates or rates of other issuers, fixed deposit rates remain unaffected throughout the tenor. As such, the returns you earn are stable and easily calculable. This allows you to better plan your investment. 

The low-risk nature of fixed deposits also helps you diversify your portfolio and mitigate the risk, keeping your investment secure.

Multiple Payout Options

FD issuers offer two payout options: cumulative and non-cumulative. In the cumulative option, you receive your principal and interest at the end of the tenor. However, in the non-cumulative option, you can choose to receive a part of your earnings at periodic intervals.

The non-cumulative option allows you to enjoy a regular inflow of funds, which you can leverage to meet your recurring expenses during retirement. Issuers generally offer monthly, quarterly, half-yearly, and annual payout options.

However, keep in mind that the overall returns in non-cumulative fixed deposits are generally lower than cumulative FDs. You can use an FD calculator to assess the returns and assess your needs to choose the right option.

Access to Loan Facility

During retirement, your cash inflow may be lower, and as such, meeting unexpected expenses may become difficult. In such situations, you can pledge your FD as collateral and get the funding you need. 

Fixed deposit issuers generally offer loans against FDs with an LTV ratio of up to 90%. This means that if your FD is for ₹1 Lakh, you can get up to ₹90,000 as a loan. However, the LTV differs based on the issuer and type of FD you choose.

Moreover, the interest on a loan against FD is generally lower as compared to other loan options. Additionally, the loan tenor can last until your FD tenor. All of this makes it a more economical and easy option to go for.

Easy Investment and Management 

With fintech advancements, investing has become simpler, quicker, and easier. Today, you can invest and start leveraging the high Mahindra Finance FD rate or the rates of other issuers in just a few minutes. That’s not all. The management of your investment is also easy.

You can withdraw, nominate, or pledge it as collateral simply by logging into your account. This becomes more beneficial during retirement when you want to avoid the hassles of branch visits to manage your investment.

Things to Consider When Investing in Fixed Deposits

Although fixed deposits are a relatively safe investment avenue, there are some factors that you should consider before investing in them. Doing so will help you make informed decisions and ensure that you have the required funds during your retirement.

Things to do before you choose an FD:

• Compare different FD issuers to choose the best option to maximise your returns
• Assess the terms and conditions to ensure that you have a hassle-free experience
• Invest for a longer tenor to leverage the compounding effect and get better returns
• Use an FD calculator to assess your investment terms and adjust them accordingly
• Check other features and benefits to get the most from your investment
• Evaluate the benefits and costs associated with fixed deposit investments

How to Invest in Fixed Deposits

Most financial institutions allow you to choose and book fixed deposits online, enabling you to invest any time and anywhere. Here are the general steps you can follow to invest in FDs.

• Step 1: Visit the issuer’s website
• Step 2: Navigate to the investment section and then to the FD section
• Step 3: Click on ‘Apply Now’ option
• Step 4: Fill in the investment form and cross-check all the information
• Step 5: Authorise the payment to complete your investment

Armed with this information, you can invest in fixed deposits to plan for your long-term goals, including retirement. Remember to diversify your portfolio and mitigate your risk to grow your wealth. Use the online tools at your disposal to make informed investment decisions and align them with your finances.

Disclaimer: No Asian Age journalist was involved in creating this content. The group also takes no responsibility for this content.