Many elders desire independence in their later years, especially after retirement. They want a leisurely life that allows them to spend more time with their grandchildren, pursue hobbies, or even travel. But they would also like to know some of the best investment plans for senior citizens.
Therefore, one of the best ways to start this chapter is to have a consistent investment routine so that your money works for you even while you sleep. Isn’t it sounds easy? But deciding an investment plan is not that easy. First, know that your investments will give you a regular income or not and secondly, will it build assets for life after retirement.
To ensure both goals, you must look for risk-free investment options offering decent returns. This blog will provide an overview of the best investment plans for senior citizens.
Who should invest in investment plans for senior citizens?
Those aged 60 and over who want a monthly income can explore these plans. The ideal investment term should be 3 to 10 years or even longer. These investments have minimum risk, tailored as per the needs of their hard time.
The Best Investment plans for senior citizens with high returns in 2023
Senior Savings Plan (SCSS)
Seniors’ Savings Plan (SCSS) is one of the postal savings plans for seniors. The Government of India supports the program. It provides security and regular income through interest payments to its investors. Interest is calculated quarterly and credited to the investor’s account. Interest rates are reviewed quarterly by the Ministry of Finance.
- Minimum investment: INR 1000
- Maximum investment: INR 30,00,000
- Interest rate: 8.20% per year
- Blocking time: 5 years
- Tax savings: SCSS investments are eligible for tax deductions under Section 80C of the Income Tax Act 1961
- TDS: Interest income is taxable, and TDS is deductible if the interest is over INR 50,000.
- Early withdrawal: Available but attracts penalties. Advance withdrawals are only allowed after one year of account opening.
For withdrawals within two years of account opening, there will be a penalty of 1.5% on the investment or deposit amount. In addition, for withdrawals after two years of account opening, a 1% penalty fee will be charged on the deposit amount.
If the account holder dies before the due date, the account will be closed, and the proceeds will be given to the agent or heir. This scheme can be considered as one of the best investment plans for senior citizens.
Post Office Monthly Income Program (POMIS)
The Post Office of India or Department of Posts (DoP) offers Post Office Monthly Income Scheme (POMIS). The Indian government supports this savings scheme. POMIS is a low-risk investment option and provides a steady monthly income for depositors on interest payments.
- Minimum investment:1000 yen
- Maximum investment: INR 9,00,000 per person and INR 15.000.000 in case of joint account.
- Interest rate: 7.40% per year
- Blocking time:5 years
- Tax savings: No tax deduction rights.
- TD: No TDS.
- Early withdrawal: The program allows early withdrawal after one year of account opening. However, premature withdrawal comes with a penalty.
- Flexible: POMIS accounts are transferable from one post office to another.
Senior Citizen FD
Senior Citizen FDs are a traditional investment product. Fixed bank deposits offer a fixed return as they are the most preferred investment option. These are considered low-risk investments as returns are guaranteed as an investment.
- Minimum and maximum investment: Varies bank from to bank
- Introductory interest rate: FD interest rates range from 3% to 7%.
Seniors can choose between receiving interest periodically or at maturity.
For recurring interest payments, they can decide between monthly, quarterly, semi-annual, and annual periods.
- Blocking time: Regardless of the plan.
- Tax savings: Investments in tax-saving FDs qualify for a tax deduction under Section 80C of the Income Tax Act 1961.
- TDS: Interest income is taxable, and 10% TDS is deductible if the interest is over INR 50,000.
- Tax: Interest income is taxable at the individual investor’s income tax rate.
- Early withdrawal: Bank deposits are liquid investments, as there is an early withdrawal facility with penalties.
- Loan amount: Available
Tax-free bonds are issued by government infrastructure organizations such as NTPC Limited, Housing and Development Corporation, NHAI, and Indian Railways Finance Corporation.
- Tenure: The term of the bond is more than ten years.
- Blocking time: The investment has a lock-in period until maturity. Despite the lock-in period, an investor can sell the bond on the stock market.
- Care about: Interest rates for these bonds range from 5.5% to 6.5%. The bond issuer pays interest annually, and the entire amount of the interest is tax-free.
- No risk: Tax-free bonds are a low-risk investment because the government backs these programs. Therefore, the default risk is low. Additionally, the plan offers principal protection and promises regular income through interest payments. Consequently, it is an ideal investment option for the elderly.
- Tax: Gains from the sale of bonds are taxable under Section 112. If the bonds are sold before the end of the year, the gains will be taxable at the investor’s income tax rate.
Assume the bond is sold after one year. In this case, long-term capital gains would be taxed at 10% without indexing benefits and 20% with indexing benefits.
It is one of the best Investment plans for senior citizens in India.
Mutual funds are investment vehicles that pool the money of many investors with similar goals and invest in stocks and debt securities. There are different types of mutual funds, namely equity funds, debt funds, and hybrid funds. Equity mutual funds invest primarily in equities, while debt funds invest in debt and money market securities. Hybrid funds invest in both stocks and debt securities. Seniors can align their goals with the fund’s goals and choose the right one.
An investor cannot just invest monthly over SIP in a mutual fund. They also have the option to withdraw their investments periodically through the SWP. The Systematic Withdrawal Plan (SWP) allows investors to withdraw regularly their mutual fund investments. Investors can start a fixed or variable amount monthly, quarterly, semi-annually, or annually.
At this stage, investors are unwilling to take the additional risk to earn an extra rupee. However, some investors have a high tolerance for risk even at the age of 60. For seniors, the best investment plan will help them earn a regular source of income and benefit from capital growth.
Hence, they should decide the best investment plans for senior citizens in India that suit their needs. Knowing the different investment options available, financial experts advise investors to make an informed decision.