Regardless of your age, you have to think of ways to make your days to come much better than what they are today; this is where investments come into the picture. Given the age constraint, senior citizens will have to ensure that they pick the right investment options.
In life, everything changes except one thing, that is planning for the future. Regardless of your age, you have to think of ways to make your days to come much better than what they are today; this is where investments come into the picture. Given the age constraint, senior citizens will have to ensure that they pick the right investment options.
With time not on their side, it is advisable to choose to invest in fixed income securities or schemes. This is in their best interest as they are not in a position to suffer losses and recover without being financially constrained.
Here are the top three investment options for senior citizens:
1) Senior Citizen Savings Scheme (SCSS)
Senior Citizen Savings Scheme (SCSS) is one of the several small savings schemes offered by the Government of India. This investment scheme is exclusively for the senior citizens of India. SCSS offers much higher returns than a regular savings bank account. The interest rate is revised periodically depending on various economic factors. The SCSS scheme is currently providing returns at 7.4% and would remain the same until maturity if you open an account now.
Investing in SCSS is considered safe as sovereign guarantees back the scheme. You can open an SCSS account at the post office or authorized banks. You have to be 60 years or older in order to invest in SCSS. If you are aged between 55 and 60 and have retired on the voluntary retirement scheme (VRS) or superannuation, then you are also eligible to invest. You can invest up to Rs 15 lakh while the minimum investment is Rs 1,000.
SCSS comes with a lock-in period of five years. Once the account matures, you can extend it for another three years. Premature withdrawals are allowed and come with certain penalties. You can open joint accounts with your spouse, who is also a senior citizen. You are allowed to open more than one account. However, your investment across all SCSS accounts shall not exceed Rs 15 lakh. This scheme provides tax benefits under Section 80C and Section 80TTB.
2) Bank Fixed Deposits
Bank fixed deposits (FDs) are one of the most preferred investment options for Indians, especially for senior citizens, when they have a lump sum at their disposal. This is because investing with banks is considered relatively safer than other investment options. However, the only catch here is that you need to have a substantial amount to invest in order to realize considerable income in the form of interest.
The interest offered by FDs is much higher than that of a regular savings bank account. FDs offer investors with an assured rate of return, and it is revised periodically depending on the economic factors such as lending rate, MCLR, SLR, and so on. Rest assured that your investment is safe and is not exposed to any risk.
The interest rate on your FD investment varies across banks. It majorly depends on the tenure and the ticket size of your investment. Senior citizens are offered a 0.5% higher interest than the general public. You can open joint accounts, and there is no capping on the investment. FDs provide much-needed liquidity. You can make premature withdrawals in exchange for a small amount of penalty.
3) Post Office Monthly Income Scheme
Post Office Monthly Income Scheme (POMIS) is offered by the India Post and is very popular among senior citizens. This scheme pays out the interest on a monthly basis and is suitable for those looking to have a regular income. The scheme has a lock-in period of five years, and premature withdrawals are allowed on paying small penalties.
If you withdraw within the first and third year, then you will be levied with a penalty of 2%. Withdrawals after the third year are processed at a penalty of 1%. You have to invest a minimum of Rs 1,500 while you can invest up to Rs 4.5 lakh. You are also allowed to open joint accounts for which the maximum investment is Rs 9 lakh. A joint account can be opened with a maximum of 3 individuals.
by, Archit Gupta, Founder, and CEO – ClearTax