Having lived a fruitful, busy life, most senior citizens wish to enjoy the remainder of their days spending quality time with their family and friends. In order to do so with minimal hiccups and hassles, he or she must be financially independent and secure. This article seeks to highlight all those means through which a senior citizen can get a steady source of income post-retirement, enough to cater to all of his or her personal, medical, and other needs, without investing a huge corpus or a lot of time into it!
Why have an investment plan?
An investment plan helps one systematically achieve one’s financial goals within a stipulated period of time. These plans help one maximise the benefits derived from savings and will ensure that wealth accumulation is continued by minimizing risks.
What are the types of investment Plans and which ones are most suitable for Senior Citizens?
There are three main types of investment plans categorised on the risk associated with it. These are-
- Low risk investment plans with low risks and low returns
- Medium risk investment plans with moderate risks and moderate returns
- High risk investment plans with high risks and high returns
Please note: risk and return share are directly proportional.
As a senior citizen who has fulfilled nearly most or all of his or her responsibilities, the funds at his or her disposal will be used to fulfil their personal needs and medical expenses. Thus, the periodic income that is needed, may not be very high, and can be achieved by undertaking low or moderate risks. Therefore, a low or moderate risk investment plan is advisable. However, this comes with some assumptions regarding the lifestyle and needs of a senior citizen – in case, one falls under an exceptional category, then these plans might not be applicable.
Also, please note that one has to keep the following questions in mind while creating an investment plan –
- What specific goal or goals are to be fulfilled? What is the priority of each of these goals?
- What are the timelines associated with each goal?
- What is the current expenses to savings ratio?
- What is the future estimated expenses to savings ratio?
- Are there any dependents that need to be supported?
- For what contingent events must you save up for?
- What is the existing insurance cover available?
Best Investment Plans for Senior Citizens to Invest in
Pradhan Mantri Vaya Vandana Yojana
Exclusively designed for senior citizens above the age of 60 years, the Pradhan Mantri Vaya Vandana Yojana, is an excellent investment option. It offers a guaranteed return of 7.4% annually and also offers a monthly, quarterly or annual payment for the pension scheme. The minimum amount received as pension is R. 1,000.
Senior Citizen Saving Scheme
Aimed at providing regular interest income for seniors above the age of 60 years, the Senior Citizen Saving Scheme, is available across all post offices and certified banks across India. It offers high interest rates (in comparison to other savings schemes) and has a lock-in period of 5 years. The minimum investment is Rs. 1,000, whereas, the maximum investment is Rs. 15,00,000. Those who have opted for the Voluntary Retirement Scheme or have been superannuated and are in the age bracket of 55 to 60 years can also opt in for this scheme.
National Pension Scheme
Created with the idea of providing retirement income to individuals, the National Pension scheme is a good scheme to invest in, for a secure, steady flow of income. The investments made into the NPS are liable for tax deduction under Section 80CCD (1B) of the Act provided that it is less than Rs. 50,000. The sums invested are put into government securities, corporate bonds and equity. The maximum age for entry into NPS has been moved to 70 and the maximum exit age is 75.
Post Office Savings Account and Time Deposit
The Post Office savings account offers a better rate of interest than its bank counterparts when it comes to savings accounts and is a steady, secure source of income for those with a low-risk appetite. The account holder also enjoys the benefit of tax exemption for amounts up to Rs. 10,000. Post Office Time Deposits, on the other hand, is a deposit scheme that can be availed for one, two, three and five years. The interest rates are periodically changed and tax benefits are available to those terms deposits that have been kept for a period greater than 5 years.
One of the most familiar and trusted methods of investment, fixed deposits are good investment options for senior citizens, especially if they have a considerable corpus at hand. The interest rates are not fixed, and vary interbank and for different tenures. The interest earned is higher than savings bank account and is liable to be exempted under Section 80C of the Income Tax Act. The exemption limits are higher for senior citizens.
Debt mutual funds, balanced mutual funds and ELSS are good options for senior citizens to consider under mutual funds. It helps in beating inflation as well as growing the value of investment. The tenure of these funds is variable, though ELSS schemes have a lock-in period of three years.
With a little effort and application of mind, a lot can be gained out of the already existing capital that one has. A disciplined approach to investing coupled with diversification of one’s portfolio into multiple sources of passive income, will ensure that a senior citizen faces little or no trouble fulfilling all of his or her dreams and desires post retirement.
Frequently Asked Questions
- Is there a right time to start investing?
There is no such fixed time that one must start investing in, though most financial experts use the mantra “the earlier, the better”. This is strongly endorsed as in this day and age, with rising prices, inflation, consumerism, pressure to achieve in lesser time spans, there is a need to create a strong financial backing to support it.
- Does it make sense for senior citizens to start investing that late in life?
It is never too late to begin investing, as there are always unfulfilled demands that are worth pursuing. It will ensure that there is zero dependence on others and creates a chance to pursue all those dreams and aspirations that were put off for later.
- Can investment plans be purchased online?
Yes, investment plans can be purchased online.
- Which schemes are exempt from tax?
Equity linked savings schemes, public provident fund, insurance plans, etc. are exempt under Section 80C of the Income Tax Act.