Best investment options for senior citizens in India
Planning your retirement is as important as planning your finances in your early years of life as soon as you start earning. It is a non-negotiable goal and with a plethora of investment avenues available, individuals tend to get confused on where to invest.
Introduction
Planning your retirement is as important as planning your finances in your early years of life as soon as you start earning. It is a non-negotiable goal and with a plethora of investment avenues available, individuals tend to get confused on where to invest.
After you attain a certain age, investing is not about aggressive returns and rather turns into a plan to preserve your existing capital. With a lower risk appetite, investors begin to prioritise steady income and seek investments that can cover lifestyle and medical expenses while also beating inflation.
In this blog, we will learn about the best investment options available for senior citizens in India, importance of retirement planning, and more. Let’s get started!
Best Investment Options for Senior Citizens in India
Following is the list of best investment options for senior citizens in India:
Senior Citizens Saving Scheme
Senior Citizens Saving Scheme or SCSS is like a FD where you invest a lump-sum amount for a specific tenure and get quarterly interest. It is a government-backed savings scheme offering the highest interest rate of 8.2% per annum. The minimum investment amount is Rs. 1,000 and a maximum of Rs. 30 lakhs can be deposited under the scheme.
The scheme has a mandatory lock-in of 5 years and can be extended up to 3 years more. Individuals aged 60 and above can open their SCSS account with any bank or post office. Please note, you can also avail tax exemption under section 80C of the income tax act.
Bonds
Both government and companies issue bonds to raise capital through debt and pay interest to investors against their capital. The coupon rate is fixed and hence acts as a source of predictable income. The interest is paid to investors monthly, quarterly, half-yearly or annually. Bonds are a good investment option for senior citizens who are looking for a regular income.
Senior Citizens FDs
Senior Citizens Fixed Deposits are regular bank FDs that offer a higher interest to individuals above 60 years. The interest rate in these FDs is generally higher by 0.50% and the tenure ranges from 7 days to 10 years. Some banks offer as high as 8.00 % depending upon the tenure of the FD. Also, tax-saving FDs are also available with a minimum lock-in of 5 years.
Please note, FDs come with a DICGC insurance where, if the bank defaults, investment up to Rs. 5 lakh per bank per person is insured.
Post Office Monthly Income Scheme (POMIS)
POMIS is a low-risk investment plan offered by India post. This is a monthly income scheme offering an interest of 7.4% per annum. Anyone aged 18 or above can invest in POMIS with a minimum amount of Rs. 1500. The tenure of the scheme is 5 years and is best suited for individuals seeking regular monthly income.
Please note that you can also open a joint account in POMIS.
Annuity Plans
Annuity Plans are offered by the insurance company wherein you can invest in lump-sum and get regular income payments. This is most suited for retirees seeking regular income. You can choose from the two annuity options like immediate annuity, i.e. income right away or deferred annuity, i.e. income after a specific period. This investment security ensures fixed returns without getting affected by the volatility of the market.
Mutual Funds
Mutual Funds pool money from various individuals and then invest it in the market. There are different types of mutual funds available and the best suited for senior citizens are the best and conservative funds which invest money mainly in debt instruments and government securities. The debt funds offer comparatively high returns with a limited risk and have no specific lock-in. You can liquidate your capital anytime by paying an exit load.
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Importance of Investment Plans for Senior Citizens
Planning your retirement is non-negotiable and it is as important to preserve your capital. The importance of financial planning are as follows:
Generating Regular Income:
Getting a regular income is very important to fulfill your day to day expenses, once you retire. Investment instruments like POMIS, SCSS, FDs, etc. offer a monthly or quarterly income and help you maintain a comfortable standard of living after retirement.
Beat Inflation:
With the rising inflation, your savings may not suffice your life after retirement. It is important to put your capital at play to generate an income that could at least beat inflation. Always calculate the post-tax return and make sure that your portfolio rises at a rate higher than the inflation so that your purchasing power doesn’t reduce.
Managing Risk and Diversification:
After a certain age, it is more important to preserve your hard-earned money rather than getting aggressive returns. Planning your retirement and diversifying your investment helps to reduce the risk and exposure to the market volatility and help you generate decent returns.
Tax Saving:
Taxation plays an important role in investment. Your returns can significantly reduce if not managed properly. It is important to plan wisely and invest in some tax-saving investment instruments to increase your returns.
Final Words
Investing after the fifties is not about aggressive returns, and rather about safety, liquidity, and regular returns. Individuals should insightfully design their portfolio with a balanced mix of fixed income instruments like POMIS, SCSS, and FDs, with a limited exposure to the market volatility through mutual funds. This will help you ensure stability and predictable returns along with preserving your capital.
It is important to consult your financial advisor and calculate the risk before investing into any financial instruments.
Happy Investing!
Disclaimer: Investments in debt securities/municipal debt securities/ securitized debt instruments are subject to risks, including delay and/ or default in payment. Read all the offer-related documents carefully.
Frequently Asked Questions
Which investment options are best for senior citizens seeking monthly income?
The Post Office Monthly Income Scheme (POMIS) offers monthly interest at the rate of 6.6% per annum. Additionally, there are corporate bonds offering monthly and quarterly interest which is a good investment options for individuals seeking regular returns.
Is SCSS completely risk free?
SCSS is safe but not completely risk free as it carries a liquidity risk and interest rate risk. The scheme has a minimum lock-in of 5 years and in case the interest rate increases, you will continue getting the same returns at which you invested.
Are there any other investment options excluding the government schemes?
There are various other options like debt mutual funds, conservative hybrid funds, annuity plans, bank FDs, government and corporate bonds, etc which are different from the government schemes.
How are senior citizen FDs different from regular FDs?
The senior citizen FDs are similar to that of regular FDs offering a higher returns of up to 0.50%.
