Who doesn’t want a luxurious life after retirement? To not worry about finances and live carefree? With the right investment options for senior citizens, you can choose to live the life you have always dreamt of. Most pre-retirement schemes do not give lucrative benefits but ensure high stability. Therefore, when it comes to investing, Senior Citizens need to look for a balance between returns and capital protection.
Investment Options For Senior Citizens In The Market
There are a number of investment schemes for senior citizens available in the market. Banks and post offices provide FDs and RDs for senior citizens that involve low risk and fixed-return. The Senior Citizens Savings Scheme (SCSS), the Pradhan Mantri Vaya Vandana Yojana (PMVVY) by the Government, involves low risk and high return. Other investment options like National Pension Scheme (NPS), Life Insurance Premiums, and Mutual Funds involve relatively higher risk but with higher return options. Ideally, the best investment options for senior citizens should involve a mix of investments delivering regular income and wealth creation.
Best Growth Investment Plans for Senior Citizens
For senior citizens who want a diverse portfolio of wealth creation, mutual funds can definitely help them in growth and have a diverse portfolio. There are several mutual fund schemes in the market, out of which Debt Mutual Funds with monthly return plans are the best ones.
This is primarily because the money is invested in safe government debt funds and so the gains are given to investors on a monthly basis. Monthly Income Plans (MIP) are normally funds where 20-25% of the money is invested in equities to provide returns to its investors. But the condition for MIPs is that investors can only get dividend money out of returns not from the capital. Investors can get returns in the form of profits made from bonds, interest rate from bonds, or dividends from equities
Best Monthly Income Schemes For Senior Citizen
a. Fixed Deposit and Recurring Deposit in Banks and Post Offices
In comparison to other customers of the bank, senior citizens are offered better interest rates. A senior citizen gets typically 0.5% higher rate of return for their deposits than normal rates. Also, senior citizens are allowed tax-free interest if the interest income is up to Rs 50,000 per year. (IT Act 1961). This is applicable for FDs and RDs with Banks, Post Offices, and Savings Accounts. But ordinary customers are allowed tax-free interest if the interest income is upto Rs 10,000 per year.
Holding FDs and RDs in the Post Office works in the same way as Banks but with an added layer of safety. Since the money goes directly to the Government from the Post Office, there is no chance of default. Like Bank FD/RDs, Deposits in Post Office are also free from tax deduction. On investments in Bank and Post Office FDs, senior citizens get a benefit of Rs 1.5 lakh on taxation. But the interest on the same remains taxable.
b. Monthly Income Scheme by Post Office (POMIS)
This is one of the best government-backed investment schemes for senior citizens. Under this scheme, investors can save a specific amount of money every month. Subsequently, when the money is invested, the interest is added along with it and paid on a monthly basis to the investor. This scheme is meant for investors who want to generate cash flow every month through it but are reluctant to take any risks in the market. So it is ideal for individuals who are retired or senior citizens.
An individual can hold multiple POMIS accounts as there is no capping. But the money you can invest in each account has been fixed. In the case of a single account holder, you can invest an amount of Rs 4.5 lakhs whereas if you are opening multiple accounts then you can invest a maximum amount of Rs 9 lakhs.
Best Government Saving Schemes For Senior Citizens
a. Senior Citizen Savings Scheme (SCSS)
This is one of the best saving schemes for senior citizens. This scheme is backed by the government and the money is totally safe as it is held with the government. The total tenure of the scheme is five years which can be extended further to another three years. The interest rate in SCSS is 7.4%. Investments made up to an amount of Rs 1.5 lakhs annually is tax deductible but the interest on the same remains taxable.
b. National Pension System (NPS)
The NPS is for investors belonging to the age bracket of 18-65 years. So senior citizens can also invest in this scheme. Once you open an account you are eligible to extend it to the age of 70. For investments made under this scheme, the investor is eligible for Rs 1.5 lakh tax benefit along with additional Rs 50,000. The money invested in NPS goes to equity and debt funds according to the choice of the investor and generates return. So the money grows faster here and thus has no fixed rate of interest. On maturity of your investment, 60% of the amount is tax-free where the rest of the money must be used to buy a monthly pension.
c. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The PMVVY scheme is a monthly income plan for senior citizens. This government scheme has been extended to 2023. The age criteria is 60 years and above. Till March 2021, the scheme provided an assured pension of 7.40% per year which was monthly paid to its investors. The rate of interest from April 2021 is thereafter reset every year. The maximum amount of investment has been capped to Rs 15 lakhs. The pensioner receives the amount invested along with the final pension installment at the end of the policy term, which is ten years.
Things To Consider While Choosing The Best Monthly Income Plans
There are numerous monthly income plans for senior citizens in the market. To consider which one is best suitable for you, you need to consider the risk factor involved in the particular scheme. It is best to keep a balance of investments that have a combination of low-to-moderate risks with higher returns. Also consider schemes or plans based on monthly income and tax benefits.