What Are the Investment Options for Pensioners and Senior Citizens?

Post-retirement, people often look to relax and take things slow; an aggressive investment strategy is the last of their approaches. Instead, their focus is generally on maintaining their accumulated wealth and generating a regular income through investments. That is, investments that secure decent stable returns, liquidity, low-risk and safety often serve their purpose.

Even today, most senior citizens bank on fixed deposits. This is predominantly because of the trust the FDs have garnered in safe-keeping the investors’ money. 

Here are a few viable investment options that tick all the security parameters they seek. 

Investment Options for Senior Citizens

Remember that an ideal investment portfolio should contain many options rather than parking all your funds in one investment avenue. 

• Fixed Deposits

A favourite among retired individuals, FDs are highly secure investments. FDs have nothing to do with market risks and offer plenty of time horizons to choose from, depending upon needs. 

Regardless of the bank, senior citizens are generally offered a higher fixed interest rate than what is being provided to the public. Moreover, the Government has provisioned tax-free interest income for senior citizens from fixed deposits. Furthermore, interest income of up to Rs 50,000 is exempt from income tax under section 80 TTB of the Income Tax Act, making it even more lucrative. 

• Senior Citizen Savings Scheme (SCSS)

The Government runs this scheme. It is available at all the post offices and a few selected banks across India. 

A pensioner can participate in this scheme for as low as Rs 500. And the upper limit for the same is Rs 15 lakh. However, the interest rates are slightly higher than FDs and RDs offered by the banks. 

Though the interest rate has come down, it still yields decent returns. However, the scheme is only available for a maturity period of five years, with a provision of a one-time extension for three additional years. 

A nominee should be mentioned at the time of application. Investments under SCSS can be claimed under section 80C of Income Tax. 

• Debt Mutual Funds

Mutual funds allow supreme flexibility, which senior citizens might benefit from in emergencies. You have the flexibility to invest and withdraw. For instance, you can cancel at any given date, either the entire amount or just the principal or the interest. 

Returns from Debt mutual funds are slightly on the lower side. But they don’t expose your investments to the volatility of equity markets and thus fit perfectly in the ‘low-risk criteria of senior citizens. 

Investing in debt funds is relatively simple. You can start a systematic investment plan (SIP) as low as Rs 500 or make a lump sum investment. 

However, remember to check the investments made by the fund house in a debt scheme. For instance, if a debt fund invests in AT1 bonds, commercial paper or corporate bonds, then you may want to rethink your investment decisions. On the other hand, if the scheme invests in Government bonds or T-bills, it is less risky. 

• Post Office Monthly Income Scheme

Another fixed interest paying scheme. It bears almost zero risks of non-repayment as it is operated under the Finance Ministry.  And you don’t generally doubt the ability of the Government to repay. 

To invest in this scheme, you must visit the nearest post office and open your Post Office Monthly Income Scheme. It could be a single account or a joint account up to a maximum of 3 people. The minimum investment criteria of Rs 1500, while you can invest a maximum of 4.5 lakhs.

In case of the investor's death before maturity, the investment and interest are transferred to the legal heirs or nominees. Then, the investors are given a choice to further renew the scheme for five years. 

The returns coupled with POMIS might not appeal to an investor as it barely beats inflation.  But considering the negligible risk and monthly income, POMIS is relatively safe for senior citizens.