Another important thing to keep in mind after you retire is not just how you spend your money, but where you invest it. A lot of people had to delay their retirement plans in the last couple of years because so much of their money was invested in the stock market. Diversification is always important where investment is concerned, but this is especially true after retirement. If you have investments in stock keep a tab on markets in general and performance of the sectors your investments lie in to make sure your money is spread out enough to protect you from losing too much if any one industry or market plunges.
Investments must reflect your returns objective and risk appetite. The bulk of your investments and savings should be in safer fiscal instruments, such as bonds and in products that invest in them such as annuities, PPF and NSC. Allocate at least 10 to 12% of your capital for investment in riskier ventures, such as individual stocks. This will help serve as hedge against inflation and may provide unexpected financial rewards.
Make thoughtful investments to make your portfolio tax-efficient. Choose investments with low taxes on income earned from them. Below are two examples:
1. Tax free bonds and tax deferred bonds.
2. Mutual funds that are designed for no taxes up to investment of Rs 1, 00,000 are available such as ELSS and these have dividend option.
Converting investments to Cash
Instruments that attract tax should be converted to cash earlier. Compare the taxation of the capital gains versus dividend. Income from capital gain is usually taxed lighter than from dividend. Make sure that you have as much money as possible at a future date even if you have to sacrifice some at the present. However, you have to be careful that if you live longer you do not become taxable again from the returns of your investments.