Best investment options for senior citizens in India – Top 3 plans and opportunities for seniors to invest money and to get regular monthly income or pension. Careful financial planning before investment is a must for all senior citizens.
Top 3 best investment options for senior citizens in India
The investment avenues for senior citizens get limited due to restrictions like age, retirement etc.. The ever increasing inflation and decreasing interest rates makes the choice of investment even more difficult for this segment of investors. Thus, careful financial planning is a must for senior citizens.
No 1 – Invest in Senior Citizen Savings Scheme SCSS in the banks (and avoid Stocks / Commodities / Currency markets)
Any depositor may open an account at any deposit office by making an application, along with the amount of deposit in multiple of one thousand rupees, along with age proof.
A depositor may operate more than one account subject to the condition that deposits in all accounts taken together shall not exceed the maximum limit of Rs.15 lakhs and provided that deposits by depositors shall be restricted to the retirement benefits or Rupees Fifteen lakhs whichever is lower.
A depositor may open the account in individual capacity or jointly with spouse.
An individual who has attained the age of 60 years and above on the date of opening of an account is eligible and NRI’s are not eligible to open an account.
The depositor may extend the account for a further period of three years after the maturity period of five years.
The deposit made under these rules shall bear interest @ 9.30% p.a. from the date of deposit payable at the end of each calendar quarter e.g. 31st March / 30th June / 30th September / 31st December. Compounding of interest is not permitted.
In case of death of the depositor before maturity the account shall be closed and deposit refunded on application in Form F along with interest to the nominee or legal heirs in case the nominee has also expired or nomination was not made as per rules.
No 2 Invest in Bank Fixed deposits (and avoid Company deposits / FMP s / Policies)
Fixed deposits are very popular among retirees and FDs feature in almost every senior citizens investment portfolio. They offer a high degree of safety to funds and additional returns ( banks provide senior citizens with 0.25 % to 0.50 % extra interest rates).
FDs also provide a high degree of liquidity as they can be broken at fairly low penalty rates and it provides regular interest income.
Ask your bank for the monthly interest option to be transferred to your savings account directly, so that you can withdraw using your ATM card from anywhere in the world.
Check to verify the highest interest offered even if it is for a longer duration. In case of an emergency, you can even take a loan on the Fixed deposit usually upto 80 – 85 % of the FD amount.
Note that your post retirement income must meet your daily expenses, sudden health realated expenses and even beach vacation expenses at times.
No 3 Invest in Balanced Mutual funds (in preference to Monthly Income Plans of MFs)
Even though this is a recommendation at the bottom of the list, it must be understood, that this class of investment cannot be ignored altogether. Though it is risky, it makes sense to invest not more than 20 % of your entire retirement corpus in this class of Mutual funds.
Returns from Balanced Mutual funds in India is more than 10 % on an annualised basis and are tax free.
There is no limit to investing your money and you can withdraw either fully or partially anytime – usually after a year is preferable.
Also it makes sense to invest lumpsum amounts in a liquid fund and have the same transferred to the balanced fund on a daily / weekly / monthly basis.
It is important to complete the KYC formalities and the FATCA compliance as mandated by SEBI, before investing your hard earned money.
Collecting your pension and provident fund money is work half-done. You have to plan meticulously to not only make your money yield returns that are higher than inflation but also minimise the amount you have to pay as tax.
You may also consider the Senior Citizen Scheme of the Post Office to earn a good interest rate on a monthly basis. The Company deposits can be considered if you are willing to take some amount of risk. Choosing the company that has a AA rating or more makes sense.
Do not invest your money in any Ponzi scheme or any scheme that promises guaranteed returns of more than 15% annually. You can be rest assured that your money invested will never be returned to you. No matter what the temptation, stay clear from these bogus companies if you want to protect your hard earned wealth from disappearing.