Retirement Planning is an essential step for securing financial freedom in your golden years. With increasing life expectancy and rising costs, relying solely on EPF or pension may not be sufficient. Therefore, it becomes important to build an additional income source through strategic investments. Today, we compare two popular post-retirement options: the Senior Citizens Savings Scheme (SCSS) and the Systematic Withdrawal Plan (SWP) from mutual funds.
Let’s understand which one can offer better returns if you invest the proceeds from your Public Provident Fund (PPF).
Many people begin retirement planning between the ages of 35 and 40. While salaried employees often have PF contributions deducted from their salaries, the lump sum or pension received after retirement may not be enough to maintain a comfortable lifestyle. Therefore, investing wisely becomes key to ensuring a smooth retirement.
If you start saving ₹5,000 every month from the age of 40, you can accumulate a sizeable corpus by 60. Let's explore how this works.
Assumptions:
Starting age: 45 years
Monthly savings: ₹5,000
Annual investment: ₹60,000 (₹5,000 × 12)
Investment tenure: 15 years
Interest rate: 7.1% (compounded annually)
Returns after 15 years:
Total investment: ₹9,00,000
Estimated maturity amount: ₹16,27,284
Total interest earned: ₹7,27,284
PPF is a government-backed scheme that offers tax benefits under Section 80C and guaranteed returns, making it a reliable option for conservative investors.
After maturity at age 60, the PPF corpus can be reinvested. Let’s look at the potential income through SCSS and SWP.
Investment amount: ₹30 lakh (maximum limit allowed)
Interest rate: 8.2% (quarterly payout)
Tenure: 5 years
Returns:
Quarterly income: ₹61,500 (approx. ₹20,500/month)
Total returns after 5 years: ₹42,30,000
Total interest earned: ₹12,30,000
SCSS is a secure, government-backed scheme offering guaranteed returns with fixed quarterly payouts—ideal for retirees seeking financial stability.
Investment amount: ₹80 lakh
Expected return: 12% annually
Withdrawal: ₹10,000 monthly
Tenure: 5 years
Returns:
Total maturity amount: ₹1 crore+ (based on market performance)
Monthly income: ₹10,000 (can vary)
Flexibility: Withdraw more or less based on needs
SWP is more flexible and potentially more rewarding but carries market risk. The actual returns depend on the mutual fund's performance, which may fluctuate over time.
| Feature | SCSS | SWP |
|---|---|---|
| Risk Level | Low | Moderate to High |
| Return Type | Fixed | Market-linked |
| Liquidity | Moderate | High |
| Income Frequency | Quarterly | Monthly |
| Tax Benefits | Section 80C | Depends on capital gains rules |
Both SCSS and SWP have unique benefits. If you prioritize stability and guaranteed returns, SCSS is your best bet. However, if you're comfortable with market risk and looking for higher returns, SWP can be a better fit.
The choice depends on your financial goals, risk appetite, and income requirements post-retirement. A well-balanced portfolio with a mix of both may be ideal for many investors.
