Things to consider when using fixed deposits to fund your retirement

Keywords: fixed deposits, FD interest rates for senior citizens, senior citizen account, senior citizen savings account

Retirement is like an unknown planet when you are in your 30s and 40s. But then at the wink of an eye, you will reach 60, and if by then you do not have your finances sorted, you may be in for bigger worries.

If you are financially savvy, you might consider investing your retirement funds in stocks, bonds and shares. But if you are one of those who shivers with the name of investment, its best you opt for easy tried and tested solutions such as fixed deposits.

Here are things to consider when using fixed deposits to fund your retirement:

Easiest option: Why do you think our parents and grandparents believed in nothing but fixed deposits? Because they are easy to understand. All you need to do is put your money in fixed deposits and you will get a fixed annual interest on the sum.

Most convenient: Convenience is a big thing when you are retired. Sifting across different means of incomes from different types of investment at that age is no easy feat so it's best to keep things simple. You don't have to do much when you want to open a fixed deposit. All you need to do is visit the local bank branch once, fill up a form, and you are sorted. In fact, in institutions such as IDFC FIRST Bank, there is an online fixed deposit opening facility so with just a few clicks you can open your fixed deposits through net banking, too.

Safety of capital: Post nationalization, banks are considered safe havens. Funds parked with institutions such as IDFC FIRST Bank are considered as good as government securities. So when you put your life's savings in a fixed deposit with a bank like IDFC FIRST Bank, your capital is in good hands. You can sleep peacefully.

Fixed deposits versus savings account: It's not a bad idea to keep your money in senior citizen savings accounts. Senior citizen accounts give a higher rate of interest compared to non-senior-citizen accounts. Plus, institutions such as IDFC FIRST Bank give doorstep service to senior citizens

However, why keep your funds idle when you can get a 4-5 per cent higher interest on your funds through fixed deposits? For instance, short-term IDFC FIRST Bank FD rates for senior citizens range from 4.50 per cent to 7.50 per cent. FD interest rates for senior citizens for long-term deposits (say tenure of five to 10 years) offer better returns of up to 8.75 per cent per annum. So obviously it makes more sense to keep your funds in fixed deposits as it's going to give you better returns.

However, if you are looking for more liquidity, then you can keep a part of your retirement fund in senior citizen savings accounts as well. Unlike a fixed deposit, a senior citizen account lets you withdraw the money whenever you wish to. You might suddenly need funds for hospitalization of your spouse. At such times, a better option than breaking your fixed deposits is by taking out money from your savings accounts.

Experts, therefore, opine that you should divide your retirement fund between liquid funds in senior citizen savings account and fixed deposits for a smoother ride ahead.