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POSTED BY ON January 1, 2013 11:16 pm COMMENTS (3)
Hi Experts,
Only one basic doubt.
Goal: Regular income every year like a passive asset(It is not like the monthly expenses will be covered once the interest from the tax free bonds come,they any how route this amount to any of the investments only). they have a corpus of 5 lakhs.
My father(Retired govt emp(53), 1 st tax slab) and mother(home maker also in the 1 st tax slab) .
I am doing a comparision between the annuity and the Tax free bonds(IIFCL)
Tax free bonds give a standard close to 8 percent tax free returns. But leading annuity provider gives a return upto 7.5 and that too taxable one.
I think for buying a annuity i can buy a tax free bonds. But they are in the 1 st tax slab only.
For annuity i have gone thru this below article and see lot of disadvantages.
http://capitalmind.in/2010/01/low-annuity-returns-in-india/
Is it wise to have a chunk of money in the tax free bonds eventhough they are in the first slab and rather than buying an annuity?
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Dear FFC
I can understand what you are trying to say!
Based on the amount(Yearly addtional income) i need to plan the rest of the money in a compounding instrument to beat the inflation.
Put a small amount of money in MFs according to the risk appetite of my parents(I think balanced fund also ok)
I thought of taking your opininon because I hired a financial advisor from a reputed firm , He has suggested me intially a single invest plan(ULIP) and i truned down and now he has suggested me the Annuity plan , now also i am going to turn it down.
I just want to confirm with you people . Am i going in the right track by rejecting suggested plan?
Thanks for helping out!!!
My aim is not be a victim for his allowances(I am ready to pay his fee). I should not end up in investing in a wrong product.
Jagoinvestor forum has helped me a lot throughout the last 1.5 yrs. and helped me from not being fooled by any Lic agents and financial planners.(Hope i will not fall in the future also wth JI s help)
Regards
Vignesh
Dear Vignesh,
I reread your question and realized you say you don’t depend on this money or its interest for monthly expenses.
The first question I should ask is why annuties or tax free bonds? Yes tax frree bonds are better than annuities and you can invest some portion of it there for regular annual incomes to supplement your parents income from pension etc.
how much to invest depends on income from these bonds needed for comfortable living
Why dont you invest a good amount of the rest of the money in instruments that give compounding benefit as I mentioned above so that it will be useful to fight inflation in future and can also serve as a health corpus for your parents?
Annuities are terrible products as you have researched yourself.
Tax free bonds are more advantageous but don’t park all your eggs in one basket.
Spread your risk with some portion in FDs and tax free bonds.(more than one company)
Use post office mis scheme to avoid tds (but interest is taxable)
Some portion will be taxable. You can avoid this and put all the money in tax free bonds but this is risky ( these bonds are low risk investment but still not zero risk for that matter even FD has some risk!)
you should also consider investing in equities (10%) and some portion in debt instruments that give compounding returns for a growth component to fight inflation in the long run 53 is very young!