Top 3 investment options for Senior Citizens – Check features, benefits, interest rates

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May 27, 2021 10:06 AM

Various financial instruments in the market offer special benefits to senior citizens, and are not only limited to higher assured returns on their investments but also provide greater tax exemptions, with monthly income. One can choose from an instrument depending on his/her need.

post office national savings certificate know interest rate tenure features, 2021 Post Office interest rates, small savings schemes, National Savings Certificates, KVP, Time-deposits, Public Provident Fund, Senior Citizens Savings Scheme, Sukanya Samriddhi Yojana, features, Options for Senior Citizens, fixed income Options for Senior Citizens, lower tax bracket,Regular bonds, Tax-free bonds, Post office schemes, Bank deposits, Pradhan Mantri Vaya Vandana Yojana, RBI Savings BondAs compared to the general public, senior citizens get higher interest rates on fixed deposits from banks.

The risk appetite of every individual keeps changing with age, and for people above 60 years of age, the risk appetite changes along with the expectations of returns.

Senior citizens find it difficult to zero down a place to put in their money, not because of a lack of options in the market but they fear if not invested in the right instrument during retirement, they could face the challenge of outliving their savings that they have accumulated over the years.

Experts suggest one could opt for such financial instruments that minimize the risk of investment and also give assured returns, to stay clear of this.

Various financial instruments in the market offer special benefits to senior citizens, and are not only limited to higher assured returns on their investments but also provide greater tax exemptions, with monthly income. One can choose from an instrument depending on his/her need.

Fixed Deposits

Bank fixed deposits are known to be one of the safer investment options, due to which they are one of the most popular investments in India. Investors can invest lumpsum money in an FD, which also offers assured returns, in the form of interest. Also, there is no limit on the maximum amount that can be invested in a bank fixed deposit.

As compared to the general public, senior citizens get higher interest rates on fixed deposits from banks. In general, an additional interest rate of 0.50 per cent is what is offered by banks to senior citizens. Big banks like SBI offer 6.20 per cent, on the 5 to 10 year FD, whereas ICICI offers 6.30 per cent, and HDFC offers 6.25 per cent, to senior citizens.

Investors can also choose how they want to receive their payouts – For instance, it can be either the principal amount along with the interest at the time of maturity (cumulative) or if an investor wants the money to meet their daily expenses, he/she can opt for regular interest pay-outs (non-cumulative option).

Post Office Monthly Income Scheme (MIS)

Post Office MIS is a popular savings scheme among senior citizens. The 5 year MIS account pays out interest on a monthly basis and offers an interest rate of 6.6 per cent per annum. Hence, according to experts, it is preferred by the retired and senior citizens who want a regular monthly income.

One can invest Rs 4.5 lakh under this scheme, in a single account, and jointly, one can invest Rs 9 lakh in a joint account. Rs 1,500 is the minimum amount that is required to set up a monthly income account.

Even though withdrawal from the MIS scheme can be made after 1 year, a penalty of 2 per cent is charged on the deposit amount if withdrawn between 1-3 years. After 3 years, on withdrawals, a 1 per cent penalty is charged.

Post Office Time Deposit (POTD)

For people who are looking for fixed income options, experts suggest POTD is the ideal option. It is an alternative to bank fixed deposits and term deposits. The principal amount invested with post office time deposit and the interest earned is backed by a sovereign guarantee, hence, it is known to be a safer option than fixed deposits.

The interest of time deposit is calculated quarterly, paid annually, and currently offers an interest rate of 6.7 per cent for the 5-year tenure.

A Post Office Time Deposit account can be opened at any public sector banks or private ones like ICICI Bank, and HDFC Bank and the minimum deposit that can be made under is Rs 200 after which in multiples of Rs 200.

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