How well your Employees are Prepared for Retirement

Retirement is a strong word that can be a total nightmare for your employees because retirement means no fixed salary, no income plus all the constant expenditure. It is time that you, as a responsible employer start preparing your employees for retirement so that they can have a happy life after retirement. Life after retirement should be tension free and full of fun so ensure that for your employees who’ve worked so hard for you all these years to make sure that your company can develop. Your employees are your asset and keeping that in mind is very necessary.

There are many ways to prepare your employees for life after retirement and we will discuss about top ways to help them live a great life and enjoy life to the fullest because retirement is different for everyone and depends on factors such as the need of income, social security, pension, part-time job, life expectancy, how much risk the person is ready to take, etc.

Mutual funds

Encourage your employees to invest in mutual funds that are also known as “retirement income funds” or “income placement funds”. In this, the retiree gets full benefits because the assets are preserved, and priority to income and growth is given. With mutual funds, the retiree is likely to get positive returns that are either above or at par with the prevalent market inflation rates. Inflation-adjusted gains are what makes mutual funds lucrative. Besides, the asset also grows and the retirement fund isn’t that much exposed to market risks. You can guide them to invest a certain portion to equity mutual funds – this way they can focus on getting steady returns instead of aiming for options that are volatile.

Senior Citizens’ Saving Scheme

You can also educate employees about the different schemes available in the market such as the SCSS or the Senior Citizens’ Saving Scheme. Anybody who is above 60 can avail this scheme. The current rate of interest under this scheme is 8.6 per cent per annum and this is fixed for five years also after the scheme matures the retiree can extend it for three more years. A retiree can invest up to 15 lakh under this scheme also the retiree will be able to open more than one account if need be. The high rate of interest will ensure a steady flow of income and the retiree will be tension free because even if the interest rates fluctuate, this is a flat rate which will remain the same till the tenure lasts. SCSS ensures tax benefits as well under section 80C and if the money can be withdrawn anytime as per the requirement of the retiree.

Limit loans

Loans should ideally be taken as the final resort to funds supply. But taking several loans is never a good idea, and definitely not when employees need to plan for a financially secure life after retirement. You can help them plan for emergencies so that they do not need to withdraw significant amounts off their retirement funds which are meant to sustain them for the rest of their lives.

Medical security

Many companies both the government-undertaken as well as private ones, provide medical reimbursement to their employees even after retirement. This ensures the worker’s financial security because medical exigency can be pretty severe and retirees find it quite difficult to cope with these kinds of medical emergencies after retirement. Team up with a health insurance company and provide medical security to your employees.

Multiple Employer Plan

You can offer a beneficial retirement plan to your employee by joining hands with Multiple Employer Plan. In this, the tax credit is the key point considering which a retirement plan is started. You can provide a retirement plan to your part-time workers as well to ensure that they too have a great life after retirement. At least encourage them to save for their retirement by deducting a lump sum of money from their salary.

Fixed Deposits

This is an age-old way to get positive returns, plus this way the money remains absolutely safe with the bank. Currently, the fixed deposit interest rate remains constant at 7.25% per annum for 10 years. Senior Citizens are likely to get at least 0.25-0.5 per cent extra per year, obviously, this varies from bank to bank. Suggest that your employees be smart investors -instead of locking an amount for a given period of time, he or she can spread out the fund and invest across diverse schemes with different tenures.

Tax-free bonds

A retiree’s portfolio may also feature tax-free bonds. Generally government-sponsored institutions issue such bonds such as Indian Railway Finance Corporation Ltd (IRFC), Power Finance Corporation Ltd (PFC), National Highways Authority of India (NHAI), Housing and Urban Development Corporation Ltd (HUDCO), Rural Electrification Corporation Ltd (REC), NTPC Ltd and Indian Renewable Energy Development Agency. However, the retiree can buy or sell them on stock exchanges. Tax-free bonds will remain stagnant for 10, 15 and 20 years. A retiree must be absolutely sure before investing in these bonds because the fund can’t be used for the specified tenure that the retiree is opting for. The interest that the retiree will get will not be taxable, so no question of TDS. These tax-free bonds payout yearly so if a retiree thinks this will ensure his or her monthly income then that might not be the case. As an employer, you need to put down clearly what are the merits and demerits of these bonds so that your employee can understand easily and decide accordingly.

The key is to communicate

Not all employees might be aware of ways to secure themselves financially after retirement; so you need to discuss these matters with an intention of offering some positive way out.

The best way to prepare them is to start early, maybe soon after they begin their career. This way, by the time they retire, they will have a robust financial portfolio that allows them to enjoy life without compromising on their lifestyle. As the employer, you need to take this initiative to build their confidence and walk the path to a financially secure future.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh / Enquire