Is a Fixed Deposit Investment Sufficient for Retirement Funding?

24-June-2021 |

Retirement is something most people look forward to. The idea of spending their time where they can relax, rejuvenate, and spend time doing the things they love is everyone’s cup of tea. But while it is fun to dream about your golden years, it is crucial to take concrete steps towards making it true. That is why retirement planning is a must.

To ensure a peaceful post-retirement life, you need to invest and grow your current income, as only relying on your savings is not enough. From the multitude of investment avenues, fixed deposits have been the go-to choice for retirees in the past.

But given the changing landscape, is a fixed deposit for retired persons enough? Read on to find out.

How does a fixed deposit (FD) work?

A fixed deposit is an investment cum savings instrument offered by banks. To open a fixed deposit, one has to deposit a one-time lump-sum amount for a fixed duration. This duration can range anywhere between 7 days to 10 years.

The invested money then accumulates interest as per the fixed deposit interest rate as per the rates set by the bank for the specific financial year. On the completion of the tenure, the person who opens the fixed deposit can remove the funds.  


Is an FD good for retirement?

The workings of an FD are simple. You invest a specific sum of money and get returns after some time according to the fixed interest rates. The simplicity of FDs is what attracted most income earners to opt for it as their retirement tool. Anyone eligible could open an FD at his/ her nearest bank and get returns with little to no involvement. Moreover, the interest rates seem good enough for most aspiring retirees.

However, what FD investors sometimes fail to consider is the fluctuating inflation rate in India.. So, by the time you get returns from your FD, chances are you receive only about 1%-2% increased returns adjusted for inflation, which are as good as leaving your money stagnant.

Moreover, the returns earned from FDs attract TDS (Tax Deducted at Source) as per the relevant Income Tax laws if the interest earned exceeds Rs. 10,000 in a year(Source: PaisaBazaar). Thus, the actual income growth from an FD is minimal and is not enough to build a retirement corpus.  


How do you get a fixed income after retirement?

FDs might seem like the safest option as they are non-linked and safe from any market-related risks. But as you know now, they do not reap enough returns, let alone fund 20 to 30 years of your post-retirement life.

What you need is a more profitable retirement plan – one that guarantees better benefits than an FD and is as safe as it is. A Monthly Income Plan can be the right retirement plan for you as it offers higher returns and can be customised to suit your changing needs.

Like an FD, a Monthly Income Plan is a non-linked investment product, so you don’t have to worry about any chance of losses. But here is the best part. A Monthly Income Plan is designed in a way to give you a regular stream of fixed income per month so that you can micromanage your money with ease.

As you know, life insurance is a means to provide financial support to your loved ones in case of your demise or physical disablement.  


Why choose a Guaranteed Monthly Income Plan as your retirement buddy?

Monthly Income Plans in India are a true companion for your retirement needs for the following reasons:  


  1. Regular monthly income at high interest rates.

  2. In-built life insurance cover to secure your loved ones.

  3. Customizable and can be aligned as per your changing needs.

  4. Freedom to take a loan against the insurance policy in case of an emergency.

  5. Liberty to add extra riders#/ covers for an added layer of protection only by paying a little more premium. 

 Additionally, if you opt for Tata AIA Life Insurance Guaranteed Monthly Income Plans(UIN: 110N147V02), the life insurance benefit your family members receive on the occurrence of the abovementioned scenarios is up to 11 times the annualized Tata AIA premium you pay.

Additionally, the premiums you pay are as per your flexibility and convenience – and you have the option to make monthly, quarterly, semi-annual or annual payments. This bifurcation of paying premiums and receiving month-to-month incomes makes it very easy to manage unnecessary spending in contrast to managing a huge chunk of money received at one go.


To conclude:

Securing a sufficient retirement corpus is vital if you want to lead a stress-free life in your yesteryears. Traditional investment avenues do little to build a stable corpus. A Monthly Income Plan can work as the secondary income you need, boosting your primary income and helping you build the life you deserve.


Need help to choose the right plan?


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  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and they will be subject to Company’s underwriting and acceptance.

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  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

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  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.