March 13, 2011

INDIA: Some Tips For the 80+ Super Senior Investors

NEW DELHI / The Economic Times / Finance / March 13, 2011

By Srikala Bhashyam, ET Bureau

In the last few years, India's growth story has centered around the youth which has been on a spending spree. Hence, most of the economic activity has focused on wooing this segment . This is reflected in the number of malls that are coming up or the scorching pace at which mobile phones are hitting the market.

Amid this environment, it was a pleasant surprise when the Finance Minister came up with tax sops for those aged above 80. He even referred to them as super senior citizens.

With life expectancy improving, many families have at least one individual who has celebrated his 80th birthday. With many of them having a good lifestyle and ability to manage their life independently, wealth management is also a necessity. The Finance Minister seems to have recognised this.

Investors in this category can manage money slightly differently. One is to manage their funds themselves and the other is to lend their name to their family members . With the income tax limit being raised to Rs 5 lakhs for these investors, you are bound to see a number of joint investors in the coming days. For instance, a family member can have a fixed deposit along with a super senior and enjoy a higher tax-free income.

Here are some tips for these investors:

Be wary of wrong advice

Many senior citizens are easy targets as they are not aware of many cotemporary investment options. It is important for an investor to feel comfortable with a product rather than invest in it just for the sake of keeping pace with the times. Hence, stick to products that are easy to understand and do not require constant monitoring .

Maintain liquidity

Retired investor do not have the luxury of investing in long-term and illiquid investment products and in the case of super senior citizens , the word lock-in should not be part of the investment planning. Avoid products that don't allow access.

After factoring in these crucial factors, invest in products which generate cash flows and don't pose any threat to the capital. Only after taking into account the liquidity needs, mildly riskier options like monthly income plans can be considered.

As pointed out earlier, stick to vanilla options like fixed deposits, debentures or company deposits with good credit rating. Avoid loans even if a banker is willing to give you one based on your pension income. Those who have the luxury of surplus income can consider setting aside money in balanced funds of mutual funds.

Thanks to wage revisions , a number of senior citizens have the luxury of earning a pension income of Rs 4-5 lakhs and may be left with a small surplus. If healthcare costs are taken care of, such individuals can look at monthly income plans of mutual funds with the dividend option or even balanced funds.

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