How To Plan A Comfortable Retirement With Fixed Deposits?

Fixed deposits are one of the most preferred fixed income instruments, which can help you multiply your savings over time

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By Sachin Sikka


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Investing for retirement entails setting aside a major chunk of savings to secure the future against a set of different risks involving inflation, market fluctuations, healthcare and longevity. You can hedge against these investment risks and ensure a comfortable retirement, by creating a smart and diversified investment portfolio.

Investing in growth-oriented investments like equities and stocks may help you grow your savings within a shorter span of time. However, amid increasing market fluctuations and changing economic conditions, there may be risks of losing your principal amount as well.

It is hence, better to invest a small portion of your savings in fixed income instruments, which offer guaranteed returns. Fixed deposits are one of the most preferred fixed income instruments, which can help you multiply your savings over time.

How to Maximise Returns on Your Investment?

As smart investment options that are not linked to the market, fixed deposit offers guaranteed returns. You can also reap the benefits of high-interest rates, which can help in the steady growth of your retirement savings.

If you're looking to maximise the potential of your fixed deposit returns, here's what you need to do.

  • Choose the Right Financier – Fixed deposits are offered by both banks and companies. Investors seeking higher returns may choose to invest in company FDs, which offer higher interest rates.

You may gravitate towards company FDs offering higher interest rates, but it is also important to ascertain the safety of your investment by choosing company FD issuers with high safety ratings by credit rating agencies.

CRISIL and ICRA are two such credit rating agencies, which provide an unbiased opinion on the safety on the relative safety of the sum on the debt instrument. When choosing financiers, it is important to check safety ratings, so that your investments are not at risk.

  • Renew Your FDs Periodically – Rather than withdrawing maturity proceeds, renew your FDs to earn additional interest and benefit from the power of compounding. The interest income accrued to your principal amount also gets re-invested, which helps you maximise your returns easily. When renewing your FDs, you also get additional interest rates, offered by most financiers.

  • Grow Tax Savings – Until recently, interest income from fixed deposits held at a bank or post office was exempt from TDS up to Rs. 10,000. With the Interim Budget of 2019, the threshold has been increased to Rs. 40,000 for regular investors and remains at Rs. 50,000 for senior citizens. This means you can save more, and make your savings grow furthermore.

  • Laddering Your Investments – You could consider investing in multiple FDs and ladder your investments across varied tenors. This can help you ensure liquidity at different points in time, so you get better access to your funds, always.

One of the key benefits of investing in FDs is that you can forecast your exact returns by using an FD Interest Calculator, which helps in ascertaining the maturity amount beforehand. When you know about the returns you're likely to make, it can help you ladder your FDs easily and assign your investment goals to them.

It is also recommended to avoid withdrawing your earnings before maturity, as you may attract a penalty and it may affect your earnings. In case of emergencies, you can always consider taking a loan against your FD, so you don't have to liquidate your savings.

With several attractive benefits, FDs are indeed one of the most preferred investment avenues. Recently, a major bout of market volatilities and uncertainties, fuelled by swinging stock indices, had pushed worried investors to the brink of liquidating their investments.

With a safer investment option like fixed deposits, you need not to worry about market volatilities or vacillating economic conditions. Make a smart investment choice by choosing fixed deposits to multiply your savings, and benefit from the safety and stability of your investment.

Sachin Sikka

Business Head - Retail & Corporate Liabilities, Bajaj Finance Limited.

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