Want a risk-free and profitable investment option to fund your retirement? Opening a Fixed Deposit (FD) account could be a wise decision.
FDs play a crucial role in retirement planning because of their zero-risk, predictable returns, Deposit Insurance and Credit Guarantee Corporation (DICGC) backed insurance, loan facilities, exclusive senior citizen perks, and tax benefits. IndusInd Bank Fixed Deposits further enhance these benefits with their customer-oriented features and premium digital banking capabilities.
Read on to learn about the potential of IndusInd Bank Fixed Deposits for retirement and important considerations to make your FD investments more productive.
Benefits of IndusInd Bank Fixed Deposits
1) Hassle-free instant booking: IndusInd Bank makes it possible to book your fixed deposit in just three simple steps. Apply online, provide your PAN and Aadhaar details, and fund your FD. No multiple bank visits or physical documentation is needed. This convenience means that even those with busy schedules or mobility issues can effortlessly secure their investments.
2) Inflation-beating returns: Enjoy best-in-class FD interest rates and give your hard-earned money a financial boost. It’s an effortless way to make sure that you will have a more substantial corpus when you retire and enjoy your golden years to the fullest.
3) Tax benefits: Opting for a five-year tax-saver FD can help you grow your savings and benefit from tax deductions under Section 80C of the Income Tax Act, 1961.
4) Video KYC: Completing your Know Your Customer (KYC) process is now much quicker with IndusInd Bank's video KYC facility. This service allows you to book an FD of a flexible amount instantly, which means you don’t miss the attractive interest rates because of procedural delays.
5) Periodic interest payment options: Get flexibility in how you receive your interest payments. You can choose from monthly, quarterly, half-yearly, yearly, or at-maturity interest payout options. This allows you to customise the FD to meet your cash flow needs during the retirement phase.
Considerations for using an IndusInd Bank Fixed Deposit to fund your retirement
Inflation risk
Over time, inflation can erode the real value of your savings and may leave you with less purchasing power than expected. To offset this, consider choosing longer-term FDs with IndusInd Bank.
Longer tenures benefit more from the compounding effect, where not only the principal but also the interest earned on it earns interest. This step can help you mitigate inflation’s impact and grow your retirement corpus more substantially.
Liquidity needs
There could be moments in your life when you need quick access to funds. Instead of withdrawing from your fixed deposit, which could lead to penalties and loss of interest, you can take out a loan against your FD amount. This approach helps you address your liquidity needs while keeping your savings on target for retirement.
Interest rate fluctuations
Interest rates can fluctuate because of changes in monetary policy or economic conditions and can affect your FD returns. To mitigate this risk, it is wise to adopt an FD laddering strategy. All you have to do is split a lump sum investment into smaller FDs across various maturities.
This can help you enjoy a steady flow of income as each FD matures at a different term. Also, regular liquidity means you can capitalise on higher rates. By doing so, you may optimise your overall returns and reduce the impact of fluctuating interest rates on your retirement fund.
Reinvestment risks
When an FD matures, there is always a decision to be made about reinvesting the funds. The auto-renewal facility, offered by IndusInd Bank Fixed Deposits, can be highly beneficial here. This option automatically renews your FD upon maturity at the current interest rate. This way, you ensure there are no gaps in the growth of your investment, and your retirement savings keep growing effortlessly.
Tax implications
The tax authorities subject your income from FD accounts to taxation based on your income tax slab after including it in your total income. The bank also deducts Tax Deducted at Source (TDS) if the interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).
To save taxes, you can book a tax-saver FD with IndusInd Bank. Under Section 80C, the principal component of this FD is eligible for a tax deduction of up to ₹1.5 lakh. It is crucial to note that a tax-saver FD comes with a mandatory lock-in period of five years. However, this five-year term helps your funds grow uninterrupted, which could mean more savings for your retirement through higher returns and tax savings.
Useful tips to maximise your FD returns for a comfortable retirement
Although fixed deposits offer predictable growth at zero risk, there are various strategies you can adopt to maximise your returns and make your retirement more comfortable.
Use an FD calculator
Before investing, always use an FD calculator to estimate your returns accurately. This online tool offers a clear picture of what your investment will yield at maturity. You can adjust variables such as deposit amount, tenure, and interest rate to see how different scenarios affect your returns and your retirement goals.
Choose a cumulative FD plan
While getting periodic interest payouts might seem attractive, allowing your interest to compound until maturity allows your savings to grow more efficiently. This means you could retire with a larger savings corpus.
Avoid partial withdrawals
Try to avoid premature withdrawals as they often incur penalties and can reduce your total FD returns. In cases of emergencies, it makes more sense to take out a loan against your FD instead of withdrawing it. This way, your FD continues to earn interest while you handle your financial obligations with no difficulty.
Leverage seniority
If there is a senior citizen within your family circle, like a parent or grandparent, consider booking FDs on their behalf. Because of their eligibility for higher interest rates (typically an additional 0.50% over standard rates), FDs can help you accumulate a larger corpus more quickly.
Key takeaways
Using an IndusInd Bank Fixed Deposit Account to fund your retirement can be a wise decision. You enjoy hassle-free instant booking, flexible tenures, periodic interest payment options, and seamless digital banking. The best part is the interest rate, which is one of the highest in the industry. This provides an opportunity to achieve better returns and build a sizable retirement fund.
However, it is equally important to account for key considerations like inflation, interest rates, liquidity needs, and tax implications. Knowing these details can help you apply the right strategies to boost your FD investments for retirement.
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