5 Best Investment Options for Senior Citizens

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As a senior citizen, when you finally retire from work, it's the time to take a moment and reflect back.

What did you achieve till now? All your life, you worked hard, saved money, set goals, achieved them, and ran the race of your own aspirations.

Congrats! It's time to relax now. Or technically, maybe not.

With your retirement, you now have a new responsibility - how to manage your retirement money?

Should you travel and live life, or should you also make sure to still have a regular source of income. Well, who wouldn’t want the latter while also having some of the former?

Luckily, India provides its senior citizens with several lucrative investment options. It also helps you protect your retirement savings from inflation as they generally come with higher interest rates.

Here, we offer you the list of 5 best investment options for senior citizens. So, just decide your sum, duration, and target yield and get started with your senior citizen investment plan right away. 

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1. Senior Citizen Savings Scheme (SCSS) 

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The best thing about this senior citizen investment scheme is that it is backed by a sovereign guarantee - i.e., by the Indian Government, and hence, it a safe investment plan for senior citizens.

Since August 2004, it has been serving Indian senior citizens and providing them with regular income with the highest safety possible.

Now that you know that it is a government investment scheme for senior citizens, you also need to know that it is a full debt instrument with 0 risk!

It is a win-win situation if you are trying to figure out how to invest in old age. So, if you are of the age of 60 & above, invest in it and get assured income for the entire duration.

With a maximum of ₹15,00,000 and a minimum of ₹1000, you can easily start investing here. Also, you won’t get the option to reinvest the interest earned in this scheme - the sole aim is to provide you a regular income in your old age.

The payouts you receive are on a quarterly basis- April, July, October, and January.

‍Eligibility: This investment plan for senior citizens is for persons above the age of 60.

It doesn’t cover persons belonging to the HUF (Hindu Undivided Family) & NRI sections. The only exceptions in age lie for those who opt for:
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• Voluntary Retirement Scheme (VRS) or Superannuation while they are at the age of 55-60 years.
• Retired defense personnel between the ages of 50 & 60 years.

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Rate of interest: The current RoR that is offered by this senior citizen investment scheme is 7.4%. Remember that these rates are subject to a review every quarter. Plus, the new interest rate only applies to the new investors - the old contracts remain the same.

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Tenure: The maximum tenure is for 5 years. After that, you may extend up to 3 more years.  You can permanently close your SCSS anytime, but it is possible only after the first year. However, one thing to note is that if you do not complete the tenure of 5 years and decide to close before that, you will have to face some penalties

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• Before completing 2 years: 1.5% of deposited amount.
• After 2 years, 1% of the deposited amount is taken as a penalty. 
• For the extended 3 years, there are no penalties, and your account is transferable anywhere in India. 

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2. Mutual Funds 

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As you may know, mutual funds basically pool the money from various investors and then invest it across various asset classes like equity & debt.

These are managed by experts known as fund managers.

That being said, you must have heard that mutual funds carry risk which does not make it the ideal first choice as an investment options for senior citizens. It is true that it is not without risk, but the reward for this price is lucrative- protection from inflation! It is also one of investment tools used extensively when people start saving in the early years of career to build a retirement corpus

If you feel that your risk appetite has almost died due to old age, you have the option to invest  the mutual fund investment option for senior citizens would be to invest in less risky mutual funds schemes - debt mutual funds & and hybrid mutual funds.

For earning a regular lump sum, you start through SIPs (Systematic Investment Plans) in mutual funds with as low as ₹500 (may vary across different funds).  

Eligibility: Before investing in a mutual fund scheme, whether through online mode or via conventional paper based mode, one must first complete the KYC process by filling up the prescribed KYC form.

KYC establishes an investor’s identity & address through relevant supporting documents such as prescribed photo id. (e.g., Passport, Aadhaar or PAN card) and address proof.

Returns: As mentioned before, the returns that you get on mutual funds are not fixed. They change as per market conditions, and therefore, these are also called market-linked investment instruments.

Tenure: The minimum tenure for investment in Mutual Funds is a day and the maximum tenure is 'perpetual'.

3. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

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This pradhan mantri senior citizen saving scheme is managed by the LIC and is one of its kind retirement-cum-pension scheme for senior citizens.

Through this instant annuity plan, you can start receiving a regular amount of money right after investing a lump sum amount as an investor.

As the previous SCSS scheme, it is available to all Indian senior citizens above the age of 60 (no NRIs).

Under this senior citizen investment scheme, the minimum purchase price is a bit higher - ₹1.5 lakhs - and the maximum amount is ₹15 lakhs.

This scheme has a policy term of 10 years. That is, the final pension and the final purchase price will be received by you only at the end of 10 years.

The good news is that you have the option to choose your pension payout option - monthly, quarterly, half-yearly, or yearly.

The pension that you receive is fixed, and both online and offline options are available to start investing here. Once you complete 3 years in this scheme, you can avail 75% of your purchase price as a loan if you need that.

Though you do not have to pay any GST fee on this benefit, there are also no tax-exemption benefits under section 80C for this scheme. 
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Eligibility:

• The scheme is available to individuals aged 60 years and above.
• There is no maximum age limit for entry into the scheme.
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Tenure: The tenure of Pradhan Mantri Vaya Vandana Yojana is for 10 years. The policy term cannot be extended beyond this period.

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Returns: PMVVY offers returns in the form of a guaranteed government interest rate of 4% per annum, which is paid out on a monthly basis. If you opt for the monthly pension scheme, the equivalent annual interest rate is 7.66% due to compounding. As PMVVY functions primarily as a pension plan, it is exempt from both GST and service charges.

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4. Senior Citizen Fixed Deposits 
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Senior Citizen Fixed Deposits (FDs) are specialized term deposit schemes provided by leading banks specifically for individuals aged 60 and above. These FD accounts come with distinct advantages tailored for senior citizens, including higher interest rates of interest up to 0.50%. 

They also have the option to avail a loan against their FD if the need arises. Additionally, opting for a 5-year tax saver fixed deposit as a senior citizen can help save on taxes while earning additional interest on the investment.

To start, you have two options: online with a minimum amount of ₹5000 or offline with a minimum amount of ₹10000. The upper limit isn’t fixed, but generally, most banks won’t allow a sum more than ₹2 crores.

Eligibility: 

• To be eligible for a senior citizen fixed deposit in India, it is necessary to be a resident of the country.
• Non-resident Indian (NRI) senior citizens can also open such fixed deposits using NRE or NRO accounts.
• The depositor must be at least 60 years old at the time of initiating the fixed deposit but the specific age requirement for opening a senior citizen fixed deposit may differ between banks.
• Some banks may allow individuals who are above 55 years old and have opted for early retirement to apply for this type of fixed deposit scheme. It is important to note that the rules regarding age eligibility may vary from one bank to another and are subject to specific terms and conditions.
  

Returns: Senior citizens can benefit from fixed deposit interest rates offered by banks and NBFCs, which typically range from 2.50% to 9.60% per annum. These interest rates are applicable for various tenures, starting from as short as 7 days and extending up to 10 years.

It is common for banks and NBFCs to provide an additional interest rate of 50 basis points (bps), or 0.50%, above the regular fixed deposit rates specifically for senior citizens. 

Tenure: The tenure or duration of senior citizen fixed deposits can vary depending on the bank or financial institution offering the deposit scheme. Generally, senior citizen fixed deposits in India have a minimum tenure of 7 days and can go up to 10 years or even more in some cases.

The depositor has the flexibility to choose the desired tenure based on their financial goals and requirements. It's important to note that the interest rates offered on senior citizen fixed deposits may vary based on the chosen tenure, with longer tenures often providing higher interest rates. 

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5. Post Office Monthly Income Scheme 
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This scheme is under the supervision of the Finance Ministry and has a very low risk. It provides senior citizens with a regular monthly fixed interest with considerable capital protection. 

One notable thing is that it is not exclusively meant for senior citizens.

Any Indian citizen with age above 10 years can invest here. With just ₹1500, Indian citizens can start investing here.

The upper sum limit is ₹4.5 lakhs for individuals, and it is ₹9 lakhs for joint accounts.

Eligibility:

• The eligibility to open a POMIS account is limited to resident Indians.
• Any adult individual is eligible to open a POMIS account, and it is also possible to open an account on behalf of a minor who is 10 years old or above.

Returns: POMIS offers an attractive interest rate of 7.4%, which is disbursed on a monthly basis, as implied by its name.

Tenure: The tenure has a 5 year minimum, and after they get over, you can start for another 5 years and earn double benefits!

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Some tax-saving investment options for senior citizens
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Tax planning is a crucial aspect of saving for and building wealth in retirement. So, it is ideal to explore tax-saving investment options for senior citizens. By considering investments that provide these benefits, seniors can ensure a secure financial future while optimizing their tax obligations

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Tax-Savings Fixed Deposits & Recurring Deposit
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Tax-saving Fixed Deposits and Recurring Deposits are highly secure investment options that offer tax benefits, making them the recommended choice for senior citizens.

These investment plans provide attractive interest rates, especially tailored for pensioners, and involve lower risk compared to equity investments. The interest rates are determined by banks, influenced by various factors. 

Investing in tax-saving Fixed Deposits and Recurring Deposits allows individuals to reduce their tax liability under the Indian Income Tax Act of 1961. 

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Furthermore, these tax-saving Fixed Deposits offer a deduction of up to ₹1.5 lakhs from taxable income, have a lock-in period of 5 years, and the interest received is taxable. Typically, the interest rates range between 5.5% and 7.75%.

Tax-Free Bonds

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Tax-free bonds serve as an excellent option for senior citizens seeking returns that surpass inflation and provide a steady income stream. These bonds, issued by government-supported institutions, offer risk-free investments with tax-free interest income, making them particularly appealing for individuals in higher tax brackets. 

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By considering tax-free bonds with a duration of 10 years or longer, elderly investors can aim for stronger credit ratings, increased liquidity, and higher yield to maturity returns. It is important to note that while the interest on tax-free bonds is not taxable, selling them after one year will attract a long-term capital gains tax of 10%, based on the individual's income tax bracket.

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Conclusion

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To conclude, old age and retirement come with their own pros and cons. On the one hand, you are finally relaxed and permanently off of work, and on the other hand, you are confused about how to sustain your retirement money.

Well, we have made it simpler for you to figure things out. In case you are a curious investor, we advise you to try out these senior citizen investment plans. After all, wealth creation and money generation have no age limit!

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