A retired individual recently deposited ₹1.2 crore in fixed deposits (FDs), assuming it to be the safest investment option. However, experts warn of risks that many investors overlook. Here’s what you should know before putting all your savings in FDs.
1. The Allure of Fixed Deposits
· Safety: Principal amount is generally safe in bank FDs
· Guaranteed Returns: Fixed interest rate ensures predictable income
· Ease of Access: Simple to open and manage, especially for retirees
Many people see FDs as a “tension-free” investment, but there’s more beneath the surface.
2. Hidden Risk #1: Inflation Erosion
· FD interest rates (~6–7% per year) may not keep pace with inflation
· Real purchasing power of your savings declines over time
· Example: ₹1.2 crore earning 6% per year may lose value in real terms if inflation is 6–7%
Inflation risk is often ignored by retirees relying solely on FDs.
3. Hidden Risk #2: Tax Impact
· Interest earned on FDs is taxable as per your income slab
· For high-value deposits like ₹1.2 crore, tax liability can significantly reduce net returns
· Post-tax returns may be much lower than expected
Tax planning is crucial to protect your retirement corpus.
4. Hidden Risk #3: Liquidity Concerns
· Premature withdrawal of FDs can attract penalties and lower interest
· Locking all savings in FDs reduces flexibility in emergencies
· Retirees may struggle to access cash for unforeseen expenses
5. Expert Recommendations
· Diversify Investments: Mix FDs with mutual funds, NPS, bonds, and gold
· Stagger Maturity Dates: Laddering FDs can improve liquidity and returns
· Consider Tax-Efficient Instruments: Options like PPF, NPS, or senior citizen savings schemes may reduce tax impact
· Monitor Inflation: Choose investment options that at least match inflation to preserve wealth
6. Final Takeaway
While FDs offer safety and predictability, putting an entire corpus like ₹1.2 crore into them can expose retirees to hidden risks such as inflation erosion, taxation, and liquidity issues. A balanced, diversified strategy is essential for financial security and long-term wealth preservation.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk..jpg)
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