Do you need a Monthly Income? If the answer is YES, here are 15 options in which you can invest and get monthly or periodical income (quarterly, half-yearly, or annual also). Here is your complete updated dossier of all 15 Monthly Income Options present or available in India.
Monthly Income Options are suited for investors having no or low monthly income sources. This may be due to his early retirement or superannuation from the private sector.
Do you need Monthly Income Options?
First, it is most important to check if you need Monthly Income Options. Old habits especially when you are or were in a job, make you mentally inclined – to keep monthly income sources open.
But, you know any income withdrawn or spent is – Expense. Once you consume it, it is no longer in the system called “investment”.
This means this money, will not earn anything. Also, future compounding gains will not be made on this money. So wealth erodes on every withdrawal from your portfolio.
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Morgan Housel in his latest book, Psychology of Money has a very interesting take on – What is Wealth? He says most people think what they spent is wealth. For example, gadgets, expensive cars clothes, etc. On the contrary, wealth is what is left, after spending. Wealth is what is not seen by eyes or felt by presence. Hence many wealthy people exist who do not throw parties or go on vacations 3 times a year. |
So, in a nutshell, if you withdraw and don’t spend, the money is towed away by Inflation. So you need to be cautious if you need periodical income or not. If yes, by – How Much? Here comes the importance of the most hated task in financial planning – Budgeting!
Monthly Income Options in India
The option to generate monthly or periodical income are many. Some are offered by the government or their allied departments and some by private-sector financial companies. Some are fixed in returns and most are variable. Also, many of them are rigid in terms of payment amount & frequency to change. But some of these can accommodate changes required in the future.
Here is the list-
Government Schemes or Backed by them:
- POMIS – Post Office Monthly Income Scheme
- PPVVY – Pradhan Mantri Vaya Vandana Yojana
- SCSS – Senior Citizen Savings Schemes offered by banks & post offices.
- Bank Fixed Deposits with Monthly, Quarterly, HY, or Yearly payment options. (also offered by private sector banks regulated by RBI)
- NPS – National Pension Scheme
- LIC Annuity Plans
- Reverse Mortgage (also offered by private sector banks regulated by RBI)
- EPS Pension (For employees with EPF deductions while in the job)
- Atal Pension Yojana (Only for subscribers below 40 years of age)
Non-Government Monthly Income Options
- Fixed Deposits by NBFCs or corporates (HDFC Ltd, PNB Housing Finance, etc.)
- Bonds & Secondary Market Debts Securities. (Bonds can be issued by all private or government sector companies)
- Mutual Funds with dividend options.
- Mutual Funds with SWP (Systematic Withdrawal Plans)
- Immediate Annuity Plans by Indian Annuity/Insurance Companies.
- Peer To Peer lending platforms
16th – Bonus Option for Half Yearly Income
RBI Floating Rate Savings Bonds, 2020
RBI came up with these floating-rate bonds in 2020 and they will continue the issue at 7.15% till 30 June 2021. The next reset date is 01 July 2021. The bond pays half-yearly interest with 7 years of maturity.
I have only mentioned names of the Monthly Income Options or periodical income options. For detailed rates, features & taxation, you can check links, search on the blog, or ping me through the comments section, or email madhupam at the rate thewealthwisher dot com.
What You Should Consider?
The decision to consider from above mentioned 12 options will depend on these factors:
- Taxability: Most of the Monthly Income Options are taxable as income and can be availed adjusted against Sec 80 investment as per limits set. But one needs to see he pays minimum tax so that yield increases. Also, many options like SWP have taxes like income tax, Capital Gain Tax & TDS (in the case of NRIs). One has to keep a check on these.
- Risk Appetite: while some are fixed in returns, but some are not as they offer market returns. Some even have active equity investments. So one has to consider that limit. The amount of risk you can take also decides the alternatives.
- Liquidity: Can you take out the partial or full amount in case you do not need further payments? Suppose you have plans to settle abroad, will you be able to withdraw and convert the proceeds to forex?
- Returns Mix: most government-backed and annuity plans offer in the range of 4-7% (post-tax). Although in 2020 inflation is under control, can that be assumed for the future too? In case you need to shift a certain part in equity to generate more returns, do you have that flexibility?
- Inheritance: Does the option consumes itself or leave something for future generations.
- Additional Benefits: Like health insurance or switch to another investment. (many investors do SIPs with the monthly income they get from POMIS or SCSS)
- Management: Option also depends on what you can manage or manage with help of a professional advisor. Many of these options involve understanding, paperwork, and compliances like life certificates, KYC, etc. One tends to choose where he/she is comfortable to start and manage.
Do you know about any other Monthly Income Options in India? Do share in the comments section… it will benefit all of us!
