Upon crossing the age of 60 years, every individual’s risk appetite and expectations of returns change with age. At this age, most people choose to retire and a majority of them face the challenge of not outliving their resources that they have accumulated over the years. Thankfully, there are several financial instruments that offer special benefits to senior citizens. For instance, higher assured returns on investments, monthly income schemes, and greater tax exemptions. Depending upon your need, find out which suits you the most.
The most preferred investment option is the bank fixed deposit. FDs are considered safer as compared to investments in equity, as most of these people invest a large chunk of their money and also because it comes with an assured return in the form of interest. As compared to the general public, most banks offer higher interest rates to senior citizens on fixed deposits. Banks typically offer a 0.50 per cent higher interest rate to senior citizens. For instance, on the 5-10 year fixed deposit, SBI offers 7.35 per cent, HDFC offers 7 per cent, ICICI offers 7.50 per cent, and Axis Bank offers 7.5-7.75 per cent to senior citizens.
Between interest pay-out at the time of maturity (cumulative) along with the principal amount or regular interest pay-outs (non-cumulative option) to meet their daily expenses. Senior citizens can also choose how they wish to receive their payouts. Though there is no limit on the maximum amount that you can invest in an FD, the minimum amount that needs to be invested in an FD varies from bank to bank.
Post Office Monthly Income Scheme
Besides postal services, India Post, which also provides banking services, offers several savings schemes. Among the senior citizens, one of the popular savings schemes is the Post office Monthly Income Scheme (MIS). For the 5 year account, the post office MIS account offers an interest rate of 7.3 per cent per annum. The interest on post office monthly income scheme (MIS) account is payable monthly. Maximum investment limit under this scheme is Rs 4.5 lakh in a single account and Rs 9 lakh in a joint account, with a minimum amount of Rs. 1,500 required to set up a monthly income account. This is preferred by senior citizens because most people want a regular monthly income after they retire, hence a monthly income scheme works for them. The post office MIS scheme also offers liquidity after 1 year, wherein you can withdraw the deposit after a year. However, you will be charged a penalty of 2 per cent on deposit if withdrawn between 1 and 3 years, and 1 per cent penalty on withdrawals made after 3 years. These accounts are also transferable from one post office to another across the country.
Post Office Time Deposit
For those looking for fixed income, the post office time deposit (POTD) is an alternative to the bank fixed/term deposits (FD). Experts suggest, POTD to be a safer option than an FD because the principal invested and interest earned are backed by a sovereign guarantee. If you want to invest in a POTD, you can open it from any public sector banks or private ones like ICICI Bank, Axis Bank, and HDFC Banks. The minimum deposit is set to be Rs 200 and thereafter in multiples of Rs 200. Currently, for the 5-year tenure, the interest rate offered is 7.8 per cent, which is payable annually but is calculated quarterly.