enior citizens usually prefer safer category of investments to be free of any kind of worries regarding the Investment and returns earned on them. With age the risk aversion is often seen as a concern for the elderly as they need to keep the lifetime of their earnings into a safe place with a guaranteed outcome. Moreover, the tax applicability aspect of returns also play a big role. If the returns are tax free then that would be an added perk for the retirees.
On the contrary, market linked securities may bring more returns but the volatility of market itself distracts the senior citizens from opting them. Plus, the fluctuating returns do not look attractive given the risk attached to such investments.
A few investment options that might be considered by the senior citizens are discussed here:
1.Post Office Monthly Income Scheme or MIS– Those who want a regular monthly income may select this scheme. It yields a return at 6.6% annually in case of a 5 yearly MIS account. The interest is earned on a monthly basis. The minimum amount required to be invested is Rs. 1500. Maximum of Rs. 4.5 lakh can be invested under this scheme. A joint account allows an investment up to Rs. 9 lakhs. The withdrawal from this account however is subject to a penalty. A withdrawal can be made after one year. The withdrawal if made between 1-3 years then it shall be charged a penalty of 2% and if after 3 years then 1%.
2.Post Office Time Deposit-Post Office Time Deposits come with a sovereign guarantee and hence a better option than Bank fixed deposits. This option enjoys a stronger position when it comes to the principal and interest amount as compared to a regular deposit. At present the rate of interest at 6.7% is being offered for a 5-year time deposit. The interest is calculated on a quarterly basis and paid annually. The minimum amount required to be invested is Rs. 200. Multiples of Rs.200 can be invested. A Post Office Time Deposit account can be opened at any public sector banks or private banks like HDFC bank and ICICI bank.
3.Fixed Deposits-Bank fixed deposit is the most popular form of investment in India. They are preferred both by senior citizens and other risk averse investors. They offer guaranteed and assured returns. The payout options also vary so one can choose from them. It could be the non-cumulative option whereby a regular interest income is earned. And the other option is, cumulative returns that are earned at the time of maturity which include principal along with interest. Senior citizens earn 0.50% higher interest than the other age groups. Currently SBI offers 6.2% on a 5–10-year FDs, ICICI offering 6.30% and HDFC 6.25% on FDs to senior citizens.
4.Senior Citizen Saving Scheme (SCSS)-It’s a government run small savings scheme offering 7.40% annually. The scheme is for five years and extendable by another three years. The maximum amount that can be invested under this scheme is Rs. 15 lakh and is eligible for tax deduction up to Rs. 1.5 lakh per annum u/s 80C. The returns are higher and offers a regular income on a quarterly basis.
5.Special fixed deposit scheme for senior citizens-The special fixed deposits are effective till June 30,2021. Banks like SBI, ICICI and HDFC are offering special deposits to senior citizens for a 5-year tenure deposits. The rate of interest is above 7 percent in some small finance banks on some of their tenure to senior citizens. The interest is payable on monthly, quarterly, half-yearly or yearly basis. the tenure is 5-10 years.
6.Paradhan Mantri Vaya Vandana Yojana (PMVVY)-This scheme is operated and managed by the Life Insurance Corporation of India and is a retirement cum pension scheme. The scheme has been extended up to 31st March 2023. The interest is payable monthly and is calculated at 7.4% per annum. Tenure of the scheme is for ten years.
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Bhoi Smrutirekha Dharanidhar