The risk appetite of individuals changes along with the expectations of returns. People who have saved for retirement face the challenge of not outliving their savings that they have accumulated over the years. To stay clear of this, financial experts suggest opting for financial instruments that minimize the risk of investment and also give assured returns.
There are various financial instruments in the market that offer special benefits to senior citizens — not only limited to higher assured returns on their investments, but also greater tax exemptions, with monthly income.
Here are the top 3 options you can choose from depending on your need:
Monthly Income Scheme (MIS)
Post Office MIS offered by India Post is one of the popular saving schemes among the senior citizens. As the name suggests, the post office MIS account pays out interest on a monthly basis. Hence, it is preferred by the retired and senior citizens who want a regular monthly income. The 5-year MIS account offers an interest rate of 7.6 per cent per annum.
One can invest up to Rs 4.5 lakh and Rs 9 lakh under this scheme, in a single account and a joint account, respectively. Rs 1,500 is the minimum amount required to set up a monthly income account.
Withdrawal from the MIS scheme can be made after one year. A penalty of 2 per cent is charged on the deposit amount if withdrawn between 1 and 3 years. After 3 years, 1 per cent penalty is charged on withdrawals. The account can also be transferred from one post office to another.
Bank fixed deposits are known to be one of the safer investment options, as investors can invest lumpsum money in an FD, which also offers assured returns in the form of interest. Senior citizens get higher interest rates on fixed deposits from banks, as compared to the general public.
In general, an additional interest rate of 0.50 per cent is what is offered by banks to senior citizens. Big banks like SBI offers 6.75 per cent on the 5 to 10 year FD, whereas ICICI offers 7.25 per cent, and HDFC Bank offers 6.80 per cent to senior citizens.
Investors can also choose how they want to receive their payouts. It can be either the principal amount along with the interest at the time of maturity (cumulative) or if an investor wants the money to meet their daily expenses, they can opt for regular interest pay-outs (non-cumulative option). There is no limit on the maximum amount that can be invested in a bank fixed deposit.
Post Office Time Deposit
This is for people who are looking for fixed income. POTD is an alternative to the bank fixed deposits and term deposits. The principal amount invested with POTD and the interest earned are backed by a sovereign guarantee. Hence, it is known to be a safer option than fixed deposits.
Time deposit currently offers an interest rate of 7.7 per cent for the 5-year tenure. The interest is calculated quarterly, paid annually.
The minimum deposit that can be made under post office time deposit is Rs 200 after which in multiples of Rs 200 can be made. A Post Office Time Deposit account can be opened at any public sector bank or private ones like ICICI Bank and HDFC Bank.