Post-retirement, people often look to relax and take things slow; an aggressive investment strategy is the last of their approaches. Their focus is generally on maintaining the wealth they have accumulated and/or generating a regular income through investments. That is, investments that secure decent stable returns, liquidity, low-risk and safety often serves the purpose for them.
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
Keep in mind that an ideal investment portfolio should contain a mix of investment options rather than parking all your funds in one investment avenue.
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. 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)
This scheme is run by the Government. It is available at all the post offices and a few selected banks across India.
A pensioner can participate in this scheme with as low as Rs 500. And the upper limit for the same is Rs 15 lakh. The interest rates are slightly higher than FDs and RDs offered by the banks.
Though the interest rate has come down, it still pays out decent returns. The interest rate for Q1 FY2021 stands at 7.40%. 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 as under section 80C of Income Tax.
Debt mutual funds
Mutual funds allow a supreme level of flexibility, something which senior citizens might benefit from, in case of emergencies. You have the flexibility to invest and withdraw. For instance, you can withdraw 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 fairly simple. You can start a systematic investment plan (SIP) as low as Rs 500 or make a lump sum investment.
However, keep in mind 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, then it is less riskier.
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 need to 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. POMIS has a tenure of 5 years, and as of June 2021 pays 6.6% interest which is credited to your account every month.
In case of the death of the investor before maturity, the investment is transferred to the legal heirs or nominee along with interest. The investors are given the choice to further renew the scheme for 5 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.
These are a few investment options that individuals who have already retired can check.
However, the decision should meet your post-retirement needs including monthly pay-out and expenses. So based on your needs, you should note factors including capital available for investment, tenure, risk appetite, and frequency of payout sought.