How do I turn my savings into a monthly pension?
Updated 7 min read By Cashflow and Wellness Advisors
Short answer
Combine a few sources rather than relying on one. Government schemes such as SCSS and Post Office MIS give steady, fixed interest within their limits; an FD ladder adds predictable income with yearly access; an SWP from mutual funds can add income that has a chance to keep up with inflation; and an annuity locks in a payout for life. Keep a separate reserve so the income is never interrupted.
For thirty years, money arrived on the first of every month. Now there is a lump sum instead, and the question every retiree asks is the same: how do I make this pay me like a salary, without running out?
There is no single product that does everything well. Some options pay a steady income but cannot grow. Some can grow but go up and down. Some lock your money for life. The practical answer is to combine a few, each with its own job.
What are the main options?
Rates are as of October–December 2026 and will change.
| Option | How income is paid | Rate (Oct 2026) | Tax | Access to your money | Main drawback |
|---|---|---|---|---|---|
| SCSS (Senior Citizens' Savings Scheme) | Quarterly | 8.2%, fixed for the tenure when you open it | Interest taxable at slab rate | Locked for a fixed term; early exit only on the scheme's terms | Maximum ₹30 lakh |
| Post Office MIS (Monthly Income Scheme) | Monthly | 7.4%, fixed when you open it | Interest taxable | Fixed term; early exit only on the scheme's terms | Maximum ₹9 lakh single, ₹15 lakh joint |
| FD ladder | Monthly or quarterly interest, or at maturity | Roughly 6.75% to 7.05% for seniors at one large public-sector bank | Interest taxable | One FD matures each year | Rates are moving; insured only up to ₹5 lakh per bank |
| RBI Floating Rate Savings Bonds | Interest, rate resets every 6 months | 8.05% for Jul–Dec 2026 | Interest taxable | Check the lock-in and early-exit rules before investing | Rate can fall at resets |
| SWP (systematic withdrawal plan) from mutual funds | A fixed amount you choose, monthly | Market-linked; no fixed rate | Only the gain in each withdrawal is taxed | Can be stopped or changed any time | Value goes up and down |
| Annuity from an insurer | Monthly, for life | Depends on age and type; fixed when bought | Entire annuity income taxable | Usually cannot be undone | Money is locked in; income does not rise with inflation unless chosen |
Option 1: Government schemes for the steady core
SCSS and Post Office MIS are the backbone of many retirement incomes, and for good reason: they are government schemes, the rate is locked on the day you open them, and the payout arrives on schedule.
SCSS pays 8.2% a year, credited every quarter, on up to ₹30 lakh. Post Office MIS pays 7.4% a year, monthly, on up to ₹9 lakh in a single account or ₹15 lakh jointly. Both pay fixed interest, so the amount you receive does not rise with inflation. That is the trade-off for their stability.
Option 2: An FD ladder for predictable access
An FD ladder means splitting money into FDs of different tenures — one, two, three, four and five years — so one matures every year. The matured FD either pays a year of expenses or is renewed at whatever rate is then on offer.
It is simple and easy to understand. Two cautions: DICGC insurance covers only ₹5 lakh per depositor per bank, so spread larger amounts across banks; and FD rates are being revised after the RBI raised the repo rate to 5.50% on 7 October 2026.
Option 3: An SWP for income that can grow
An SWP, or systematic withdrawal plan, is a fixed monthly payout from a mutual fund. You choose the amount; the fund sells just enough units each month to pay you.
The advantage is flexibility and tax: only the gain in each withdrawal is taxed, not the whole payment. If the money sits in an equity-oriented or hybrid fund, it has a chance of growing faster than inflation over long periods, though with no guarantee. The risk is that in a bad year you are selling units at lower prices, so the SWP should be modest and should come from money you will not need for several years.
Option 4: An annuity for income for life
An annuity is a contract with an insurer: you pay a lump sum, and it pays you a fixed income for life, sometimes continuing to your spouse. It removes the worry of outliving your money.
But the decision is usually permanent, the income is fully taxable, and unless you choose a rising option, the payout loses buying power each year. If you have NPS, at least 20% of the corpus must be used to buy an annuity at normal exit (for non-government subscribers). Many retirees use an annuity for only a part of their money, if at all.
How might these fit together?
Illustration: A retired couple, both 61, have ₹75 lakh and want about ₹40,000 a month. Rates are as of October 2026; the FD rate and SWP rate are assumptions, not forecasts. (Illustrative numbers, not a real client.)
| Source | Amount (₹) | Yearly income before tax (₹) | Roughly per month (₹) |
|---|---|---|---|
| SCSS at 8.2% | 30,00,000 | 2,46,000 | 20,500 (paid as ₹61,500 a quarter) |
| Post Office MIS (joint) at 7.4% | 15,00,000 | 1,11,000 | 9,250 |
| FD ladder at an assumed 7% | 15,00,000 | 1,05,000 | 8,750 |
| SWP from a hybrid or equity fund at 5% of the starting amount a year | 10,00,000 | 50,000 | 4,167 |
| Reserve in a liquid fund (not drawn) | 5,00,000 | — | — |
| Total | 75,00,000 | 5,12,000 | about 42,667 |
The income is close to their target, before tax. Three things to notice: most of it is fixed and will not rise with prices; the SWP and the FD renewals are where some adjustment for inflation can come from; and the reserve exists so that a hospital bill never forces them to break SCSS early.
What order should you set these up in?
Build the reserve first, so nothing interrupts the income. Then fill the government schemes within their limits, then the FD ladder, and only then put a limited share into funds for an SWP. Set up the payouts so they land in one account at the start of the month, the way a salary used to.
This ordering is exactly what we map in a first conversation. For a fuller split of a larger corpus, see how to split ₹2 crore at retirement. If you are arranging this for your parents rather than yourself, read where retired parents should keep their money. Before choosing a specific fund or annuity, take product-specific advice from a SEBI-registered adviser who has seen your whole situation.
Questions people also ask
Which gives the highest monthly income: SCSS, MIS or FD?
As of October–December 2026, SCSS pays 8.2% a year (credited quarterly), Post Office MIS 7.4% (monthly), and FDs for senior citizens roughly 6.75% to 7.05% at one large public-sector bank. But each has a deposit limit or a different tenure, so most retirees use more than one. All of this interest is taxable.
Is SWP income taxable?
Only the gain portion of each withdrawal is taxed, not the whole amount. For equity-oriented funds, gains on units held over 12 months are taxed at 12.5% above ₹1.25 lakh a year, and at 20% if held for 12 months or less. Gains on debt funds bought after April 2023 are taxed at your slab rate.
How much can I safely withdraw every month from my savings?
There is no universally safe figure. A common rule of thumb is to start withdrawals at a modest share of the corpus, around 4% to 5% a year, and raising them slowly with inflation. Withdrawing much more than the corpus earns in the early years makes it more likely the money runs out early.
Can I avoid TDS on my SCSS or FD interest?
Senior citizens have a TDS threshold of ₹1 lakh a year on bank and post-office interest. If no tax is payable on your total income, you can submit Form No. 121, which replaced Forms 15G and 15H from April 2026. TDS is not an extra tax; it is adjusted against your final tax when you file your return.
Start here
Bring your numbers. We will map what can move.
Salary, EMIs, FDs, SIPs and the commitments that repeat every month. One conversation is usually enough to see the sequence.
This article is general education, not personal investment, tax or legal advice. Figures are illustrative, not guaranteed outcomes, and rates and rules change — check current numbers before acting. Regulated investment advice is handled through the SEBI-registered adviser.