Every investor keeps seeking for ideal investment choices which can produce profitable returns. However, senior citizens have exclusive specifications from their investments. Those who cease earning just after attaining the age of 60 years appear for steady earnings from their investments to meet their living expenditures. Hence, earnings certainty and capital protection grow to be additional crucial for senior citizens than capital appreciation.
Here we are taking a appear at 5 investment avenues for senior citizens which they can rely on in the existing situation.
1. Fixed Deposits
Despite the trend of lowering interest prices in the current months, fixed deposits continue to stay an incredibly well-liked investment instrument for threat-averse investors like senior citizens, in particular at a time when capital protection has grow to be as crucial as capital appreciation. These are simple to operate and extremely liquid instruments providing preferential prices (up to .5%) for senior citizen depositors. Plus, senior citizens, who normally do not want to invest in market place-linked goods due to the connected dangers, can advantage from month-to-month, quarterly, half-yearly and annual interest payouts from a non-cumulative fixed deposit (FD).
That getting stated, “while a majority of banks are currently offering FD interest rates in the range of 3.25-6.25% p.a. for senior citizens depending on the bank and the investment tenure, there are some banks that are offering higher rates up to 7.50% p.a. Now, senior citizen depositors can open an FD with a bank offering higher rates after due diligence and risk assessment, and while doing so, they can limit their deposits to Rs 5 lakh per bank for added security as that much is covered by the DICGC,” says Adhil Shetty, CEO, Bankbazaar.com.
In addition, they can also break their corpus into many FDs with distinct tenures to develop an investment loop so that they could be benefited if the prices raise in the future. This is referred to as the FD laddering method which also guarantees higher liquidity without having the threat of losing interest earnings due to premature withdrawals in the face of a money-crunch scenario.
2. Senior Citizens Savings Scheme
Senior citizens seeking for greater prices than FDs without having taking undue investment threat could also invest in the government-sponsored Senior Citizens Savings Scheme. The SCSS is at the moment providing 7.4% p.a. and individuals above the age of 60 years can invest individually or jointly with their spouse anyplace amongst Rs 1,000 and Rs 15 lakh in it at a post workplace or a participating bank. The SCSS has a tenure of 5 years and can be extended to a different 3 years just after submitting Form B. Most importantly, investors can earn interest earnings on a quarterly basis against their SCSS investment and the interest price is fixed all through the investment tenure.
However, the quarterly interest price applicable when the investment matures just after 5 years would apply through the extended 3 years. “Investors can also withdraw prematurely after paying a 1.5% penalty if withdrawn before 2 years of completion and 1% penalty if withdrawn after 2 years of completion. Furthermore, the principal amount deposited in SCSS qualifies for tax deduction benefit up to Rs 1.5 lakh in a year under Section 80C of the I-T Act and the interest received is taxed according to the applicable slab rate. All this makes SCSS a great investment fit for senior citizens,” informs Shetty.
3. Pradhan Mantri Vaya Vandana Yojana
Senior Citizens can also think about Pradhan Mantri Vaya Vandana Yojana (PMVVY) supplied by the LIC for producing common earnings in the kind of pension. However, its largest disadvantage is the lengthy lock-in period of 10 years. As its interest price remains fixed all through the whole tenure, any steep upward movement in the fixed deposit interest prices through the 10 year period may outcome in considerable chance price for the investor.
4. Multicap Funds
Senior citizens with greater threat appetite and getting surplus funds for lengthy-term capital appreciation can think about investing in multicap funds by means of the SIP mode. Multicap funds can invest across the equity market place spectrum without having any SEBI imposed exposure limits on market place capitalization, sector, segments or themes.
“This makes multicap funds the best equity fund vehicle in the current market scenario as they can exploit market opportunities arising from the volatility in the broader market. In case of further corrections, the SIPs in multicap funds can be topped with lumpsum investments in a staggered manner. Such lumpsum investments will help in averaging the investment costs and thereby, generate higher returns as and when the market stabilizes. Investors, however, should keep at least a 7-year investment horizon for their multicap fund investments to make the most from the economic and market cycle,” advises Sahil Arora, Director, Paisabazaar.com.
5. Floating Rate Savings Bonds
Senior citizens can also invest in the floating price savings bonds issued by the RBI with a tenure of seven years. There is no age limit or the maximum quantity upto which you can invest in these bonds. These bonds can be purchased on the net and offline by means of the authorised banks.
“Any person who is a resident of India can invest in these bonds. A resident who becomes non resident later on is allowed to continue to hold these bonds. Unlike SCSS and PMVVY where the rate of interest gets fixed for the full tenure, the interest under these bonds keeps floating and the interest for a half year is announced by the RBI. Presently the rate of interest is pegged at 0.35% higher than those payable on the National Saving Certificates. So, any change in the interest on NSC shall automatically change the interest payable on these bonds. The interest on these bonds is taxable and is subject to deduction of tax at source,” says Balwant Jain, tax and investment professional.
Individuals amongst the age of 60 and 70 years are permitted to go for premature redemption of these bonds just after the seventh year of their tenure. The person bond holder who is amongst 70 and 80 can go for early redemption anytime just after 5 years and these above 80 years can go for redemption just after the bonds have run for 4 years.