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 retireesMany people see FDs as a
“tension-free” investment, but there’s more beneath the surdata-face.
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 expectedTax 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 expenses5. 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.