What are the best investment options for Senior Citizens

Retirement is an exit from one stage and entry in to another. It requires financial planning, right investments and managing funds. A look at some of the best investment plans for Senior Citizens in 2024 can help make the decision.

At the age of 60, one begins another phase of their lives. It marks the onset of retirement from an active professional life and a sort of induction into old age. Life priorities at this point in time change and financial security becomes the core concern. Senior Citizens look for investment options that provide high returns with negligible risk and assured, incremental returns. Most Senior Citizens opt for an investment that also provides a steady monthly income, especially if they don’t have a pension plan. Most salaried employees don't receive a pension upon their retirement, so identifying the right investment plan is crucial. There are many government investments schemes for senior citizens.

Some of these include:

Recurring and Fixed Deposits

Recurring Deposits (RDs) and Fixed Deposits (FDs) are favoured by senior citizens due to their simplicity, stability and attractive interest rates. These investment options provide a reliable avenue for generating passive income during retirement. Notably, they offer the added advantage of Tax exemption on interest earned up to Rs 50,000 in a financial year, making them even more appealing for individuals seeking to maximise their returns while minimising Tax liabilities.

ICICI Bank introduces the Golden Years FD Scheme, offering attractive FD interest rates and perks exclusively for senior citizens. With this, senior citizens can enjoy an extra 0.10% interest rate, supplementing the existing 0.50% per annum that they usually get with a regular FD scheme. The Scheme accommodates deposits up to Rs 2 crore, with tenure from 5 years 1 day to 10 years.

Along with FDs, senior citizens can also opt for RDs, depositing a fixed monthly sum for a specific period.

Post Office Monthly Income Scheme

Operated by the Indian government, it is a savings scheme that grants a fixed monthly amount and offers tax-benefits on investments up to INR 1.5 lakh. The maximum investment that can be made in case of a single person account is INR 4.5 lakh and INR 9 lakh in case of a joint account. It offers high interest rates - up to 7.5% assured returns. However, the income accrued is not tax-free. It has a maturity period of 5 years. The returns generated can be transferred directly to your Savings Accounts as well. The main advantage of the Post Office Monthly Income Scheme is the fixed and consistent returns it offers – as it isn’t tied to the market.

Senior Citizen Savings Scheme (SCSS)

A long-term investment scheme especially curated for Senior Citizens, it can be availed at all banks and post offices in India. The interest rate offered by this scheme is higher (8%), than regular deposit accounts; in addition to tax benefits up to INR 1.5 lakh. Any amount between INR 500 and INR 15 lakh can be invested in the Senior Citizen Savings scheme. The minimum age for investment is 58. The maturity period is five years and can be extended only once for three more years.

National Pension System

The National Pension System (NPS) presents senior citizens with a valuable opportunity for long-term investment, offering eligibility extensions up to the age of 70 years. While NPS does not provide fixed interest rates, its association with equity bonds holds the potential for substantial returns over time. By diversifying investments across various asset classes including equities, bonds and government securities, NPS aims to optimise returns and build a robust retirement corpus for investors.

NPS offers attractive Tax benefits, allowing investors to claim deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Additionally, investors can avail of an exclusive Tax benefit of up to Rs 50,000 under Section 80CCD(1B), enhancing the overall Tax efficiency of the Scheme. With its focus on long-term wealth accumulation and Tax-efficient investing, NPS emerges as a compelling option for senior citizens seeking to secure their financial future during retirement.

Pradhan Mantri Vaya Vandana Yojana

It's a low-risk investment scheme that is provided by the Life Insurance Corporation (LIC), India's largest insurance provider. It provides a fixed 10% interest rate for a period of 10 years, at most. Anyone who made an investment of less than INR 15 lakh before the last day of March in a financial year, is eligible for a monthly pension ranging from INR 1,000 to INR 10,000. The pension amount will be based on the original amount invested. This scheme is not eligible for tax benefits and exemptions.

Tax-free bonds for Senior Citizens

As the name indicates, these are bonds released by the Government of India to finance particular undertakings. Since it's the government that duly launches them, they are risk-free, in terms of non-payment of dues. They also provide fixed interest rates and tax-benefits. The duration of these bonds can be between 10-30 years depending on the particular government project and its date of completion. Normally they provide lucrative interest rates of up to 7.5% per annum. In the past big government organisations like National Thermal Power Corporation (NTPC) and Indian Railways Finance Corporation have released these bonds. The maximum amount that can be invested in these bonds is INR 10 lakh. While they do offer high interest rates, the returns are subject to prevailing economic conditions.

Debt Funds

These are types of mutual funds that are tilted towards fixed income investments. From the perspective of long-term investment, they are safer compared to other Mutual Funds but the interest rate depends on market conditions and economic environment. The interest rate can go up to 15% per annum. Another advantage associated with Debt Funds is the flexibility and liquidity involved. Money can be withdrawn even before a minimum period, though a certain withdrawal charge has to be paid.

Conclusion:

Retirement is the second-innings of life, when a person prioritises maximum financial security, minimal risk and guaranteed return on investment. Investing for financial returns post retirement is crucial and from senior citizen FDs to government saving schemes, there are many options that enable Senior Citizens to remain financially self-reliant, even after they exit from the workforce and live retired lives with their families.

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