There are various investment avenues where you can put in your hard earned money, some of which offer higher interest rates than others with personalized services.
Most people look for a safe place to keep their savings post-retirement while earning a moderate rate of return on them. There are various investment avenues where you can put in your hard earned money, some of which offer higher interest rates than others with personalized services. For instance, investment options such as Senior Citizens’ Savings Scheme (SCSS), bank FDs and RDs, post office FDs and RDs, National Pension System (NPS), Pradhan Mantri Vaya Vandana Yojana (PMVVY) and mutual funds are some of the investment options catering to senior citizens.
While options like SCSS, post office FDs, bank FDs, and PMVVY are low-risk investment options but offer fixed return, other investment option like mutual funds are relatively high-risk but offer high return. The ideal portfolio for a senior citizen consists of a combination of both low-risk fixed return investment options, and relatively high-risk high-return funds.
Find out what are the options available for you and what suits you the most, before you zero down your options:
1. Senior Citizens Savings Scheme (SCSS): SCSS is a government-backed savings scheme and the investments in the scheme are held with the government. Hence, it is known to be more secure than bank FDs. Senior Citizens Savings Scheme comes with a tenure of 5 years and can be extended by another 3 years. Investors also enjoy tax benefits with investments in SCSS — tax deductible up to Rs 1.5 lakh in a year. The interest, however, is taxable and comes with an interest rate of 8.7 per cent.
2. Pradhan Mantri Vaya Vandana Yojana (PMVVY): Pradhan Mantri Vaya Vandana Yojana is a fixed deposit with LIC (Life Insurance Corporation of India). It offers an interest rate of 8 per cent and comes with a tenure of 10 years. There is no tax deduction under Section 80C on investment in PMVVY. However, the interest rate payable is fully taxable. As is held with LIC, it is relatively a low-risk investment option.
3. Post Office Recurring Deposits and Fixed Deposit: The investments from Post Office FDs and RDs go directly to the government and as compared to bank FDs and RDs, it is much safer as under the Deposit Insurance Credit Guarantee Corporation (DICGC), bank FDs and RDs have only protected up to Rs 1 lakh. Post office deposits also do not attract TDS deduction. You will get tax benefit up to Rs 1.5 lakh on your investments in 5-year tenure post office FDs, though the interest is taxable. Investors can opt for the monthly income scheme to receive monthly income, called the Post Office Monthly Income Scheme (POMIS).
4. National Pension System: From the age of 18 up to 65, one can invest in NPS, which makes it also an investment option for senior citizens. An NPS account can also be extended up to the age of 70 after it is opened. The money is invested in debt and equity funds to generate returns, depending on the investor’s choice. After maturity 60 per cent of the NPS corpus is tax-free and the rest of the NPS corpus (40 per cent) has to be used to buy monthly pension annuity scheme. Under Section 80C, it offers tax deduction up to Rs 1.5 lakh and under Section 80CCD(1B) an additional Rs 50,000.
5. Mutual Funds: For growth and wealth creation, mutual funds can be brought in a portfolio. Even though special retirement plans by mutual fund houses are offered for senior citizens, industry experts are against it. It is suggested that by investing in general mutual funds, investors can achieve high investment returns. Large-cap funds are relatively low-risk funds, small and mid-cap funds are high-risk high-return funds, among equity funds. Up to Rs 1.5 lakh per annum, ELSS funds also offer tax deduction under Section 80C.