When we turn 60 and retire from work; a peaceful life backed by financial security is everything we want.
But when the source of income depletes and we still have to bear the everyday expenditure, the post retirement life seems a bit difficult. The financial liabilities turn into stress and ruin the peace of mind.
So what you should do, so that you don’t have to go through this? The answer is a “well planned retirement”.
What is a “well planned retirement”?
It means creating a smart way to save and invest so that it gives a suitable amount of income after retirement.
It is to diversify the money in various investment channels to create a regular source of income for post retirement life.
And there are several options other than company provided schemes such as PPF, pension etc. to help create a well-planned retirement.
Here are some of the safest investment options for senior citizens.
Senior Citizen Savings Scheme (SCSS)
The senior citizen savings Scheme has everything a retired investor would ask for- risk-free and assured return and regular payouts.
Citizens aged 60 or above can open the account jointly with spouse or individually with post office or nationalized banks or ICICI bank.
Individuals between the age of 55 and 60 who have retired on superannuation or Voluntary Retirement Scheme can also open the account.
Senior citizen investors can deposit a minimum of Rs.1000 up to Rs.15 lacs and this will be a one-time deposit for a period of 5 years.
The current interest rate is 8.6%, which is quarterly payable.
The SCSS account offers tax benefit under 80c and allows premature closure after one year. However, TDS will be deducted if the interest exceeds Rs.10000 per annum.
Since the scheme is a govt. of India product, this is one of the safest investment options for retired persons.
Monthly Investment Scheme
Post office Monthly Investment Scheme is another risk free investment option that offers an assured monthly income to retired investors.
Although it doesn’t come under 80c, this is very good monthly income plan for senior citizens.
They can invest a lump sum amount in the account and earn monthly payable interest at 7.80% per annum. The minimum amount of deposit is Rs.1500 and the maximum is Rs.4.5 lacs in single account and Rs.9 lacs in joint account.
The maturity period is 5 years. It can be prematurely en-cashed after one year after deducting applicable charges.
Tax may apply on the income as per the current rules on income tax slabs.
Recurring Deposit at Post Office/Bank
Recurring deposit schemes at post office or banks are a safe and secure long term investment option for senior citizens.
The RD account can be opened with a specific deposit amount for a specific duration. Investors can receive the principal along with accumulated interest at the end of maturity. Premature closure is applicable.
In post offices the current interest rate is 7.4% per annum and in banks it’s mostly around the same. Best part is, senior citizens can get 1% extra on the prevailing interest rate.
The interest is quarterly compounded and subject to tax deduction at source if it exceeds Rs.10000.
Once the RD matures, senior citizens can reinvest the money in other safe investment channels or create a fixed deposit.
Fixed Deposit with Banks
Senior citizens with lump sum retirement benefits can investment their money in multiple ways in order to earn interest. Fixed deposit with banks in one of those safest and reliable investment instruments where they can invest for a period of 7 days to 10 years.
However, the interest rate may vary depending on the amount and duration. It can also be different for different banks.
For senior citizens, the interest on fixed deposit is always 1% higher than the interest for normal people. If the current interest on FD for normal account holders is 8%, senior citizens can get 8% on FD.
Further, the FD holders can choose the interest repayment mode. They can select monthly or quarterly interest deposit at the time of FD account opening and get the amount in their savings account on specific days of a year.
Interest on FD is taxable. Senior citizens with non taxable income can submit form-15H at the bank for each financial year.
Post Office Term Deposits
Post Office Term Deposits are a short term investment instruments which qualifies for benefit of Section 80C of the Income Tax.
The scheme has tenure of 1 to 5 years and the interest is quarterly calculated and annually paid.
Currently the interest is,
Period – Rate
Senior citizens can open the account with a minimum deposit of Rs.200, whereas the maximum deposit amount has no limit. Any number of accounts in any post office can be opened.
National Savings Certificates
National Savings Certificates issued by post offices are another safe and risk-free post retirement investment options.
The NSCs come with 5years or 10 years maturity and offer tax benefit under section 80C of Income Tax Act, 1961.
“Buy National Savings Certificates (NSCs) every month for Five years – Re-invest on maturity and relax – On retirement it will fetch you monthly pension as the NSC matures.”
NSCs have no maximum limit for investment and no tax deduction at source. They can be kept as collateral security for availing loans from banks.
The current interest on NSC is 8.1%. The maturity value of a certificate of Rs100 purchased on or after 1.4.2012 shall be Rs147.61 after 5 years.
Equity Linked Savings Scheme
ELSS for senior citizens is a tax saving investment option. Although it comes with certain amount of risk, but the overall benefit cannot be overlooked.
ELSS is a useful retirement investment options for high income earners that helps them diversify the money.
ELSS offers flexible amount and duration of investment and these is no tax on the maturity.
The lock-in period is three and it provides liquidity option to investors as well as tax benefits under section 80C of income tax act 1961 for investment up to Rs. 1.5 lacs.
Pension plans are available for people up to age of 80 and retired persons without any previous pension plans should definitely go for it.
Pension plans offers a decent solution to monthly income requirement after retirement.
Investment in pension plans can be done in two ways. One is by investing a lump sum amount and receiving monthly payouts. The second is by depositing money quarterly and receiving it on lump sum or monthly basis.
Varishta Pension Vima Yojana and Jeevan Akshay VI by LIC can be availed by senior citizens. These pension schemes are risk-free and secured source of monthly income.
Rent from Real Estate
Investment in real estate can be a good option for retired people. They can invest their money on buying flats or house, and rent them out to earn fixed monthly income as house rent.
However, going by the current slowdown in real estate industry, one should be really careful about this investment option. There are several housing plans that are in the middle of nowhere, but investors are still paying the interest on their bank loans. So be careful and take an informed decision.
Recommended reading: 6 Best Investment Options for Retired Persons
These are some of the best investment options for senior citizens in India. However, it’s always better to have a diversified portfolio rather than putting all the money in one channel. Consider the investment schemes that offer long term stability. If opting for aggressive investment instruments, make sure to weigh the risk and return properly.