How to find out best and safe investment plans for senior citizen?

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My father retired a couple of weeks ago. And while he was able to finally put his feet up and relax, I had a new project to tackle. I had to find out the best investments for senior citizens like him. 

His retirement benefits included two kinds of payouts. 

  • The first was a lump sum portion consisting of his gratuity and Provident Fund payouts. 
  • The other was his regular pension income, received as periodic payouts.

My job was to find out the best ways to invest my father’s retirement benefits, so my parents can live a comfortable life and check off all their post-retirement goals. And believe me when I say that it’s a long list of goals they have!

What makes an investment suitable for senior citizens?

Let’s face it. There are tons of investment options in India. Finding one ideal investment option may itself be quite a challenge. But building a portfolio of the right investments for a 60-year-old? That takes a lot of work.

To make my job easier, I decided to narrow it all down and focus on just one question — what makes a financial product or scheme an ideal investment for senior citizens? Let’s find out. 

  • Capital preservation

Some investments focus on capital appreciation, while others are geared towards capital preservation instead. Most investments that carry the potential to grow your investments also come with high levels of risk. 

However, that’s not something a senior citizen’s investment portfolio can handle. So, senior citizen investment schemes should ideally carry low levels of risk and focus on preserving the capital they have built over the years. 

  • Guaranteed returns

Investment options that offer guaranteed returns are better for senior citizens. This is because you will know the exact amount of earnings you will receive from your investment. And you can use this information to plan your post-retirement lifestyle accordingly.

On the other hand, investments that carry a great degree of uncertainty may have the potential to give higher returns. However, the lack of any guarantee on the returns could make it harder for retired people to put a solid plan in place.

  • Eligibility 

Lastly, if you find an investment option that helps you preserve your capital and gives you guaranteed returns, there is only one thing left to do. You need to check if you are eligible for the investment scheme. 

Some investment options may have age limits as a part of their eligibility criteria. For instance, savings life insurance plans offer guaranteed returns and help preserve capital, but individuals above 60 years of age may not be eligible for them. 

The safest investment schemes for senior citizens

Based on the factors I’ve listed out above, I narrowed down the following investment schemes for my father. Check out the options available, so if you have a 60+ family member who needs some help with investment planning, you’ll know just how to help them. Or, if you are a senior citizen yourself, you can use these investments to give your portfolio an upgrade.

Senior Citizen Fixed Deposits

Fixed deposits may be every senior citizen’s favourite investment option. FD accounts can be opened with banks and non-banking financial companies (NBFCs). You just need to deposit a lump sum amount in your account for a specified tenure. And the bank or NBFC will pay you interest at a specified rate on the amount deposited.

There are two things you can do with this interest —

  • Receive it as regular payouts on a monthly or quarterly basis, or
  • Reinvest your interest and receive it at maturity, along with the amount deposited 

If you are looking for a regular source of income during your retired life, the first option may be ideal. But if you want to preserve your capital and earn interest in the process, you can choose to receive your interest at maturity.

Eligibility:

Resident Indians who are above 60 years of age can open a senior citizen fixed deposit account with a bank or an NBFC. 

Risk:

Fixed deposits are low-risk investment options. The only real risk is that the bank may be unable to pay out the funds at maturity — and the probability of this happening is very low. Plus, you can make sure that your risk is practically zero, thanks to the deposit insurance provided by Deposit Insurance and Credit Guarantee Corporation (DICGC). 

All bank FDs are covered by this insurance, to the extent of Rs. 5 lakhs. So, if you ensure that you limit your deposit to this amount in each of your FD accounts, your entire investment will be insured. So, in the event that your bank is unable to pay out the funds at maturity, you will receive compensation from the DICGC up to Rs. 5 lakhs.

Returns:

FD returns vary from one bank to another. But senior citizen fixed deposits typically carry a marginally higher rate of interest than regular FDs. Currently, the FD rates for senior citizens tend to range from around 5.50% per annum to 7.80% per annum.

Features and Benefits:

Check out the top features and benefits of this investment for senior citizens.

  • Flexible investment tenures ranging from 7 days to 10 years or more
  • Minimum investment amount of just Rs. 1,000
  • No upper limit on the amount you can invest
  • Higher interest rates for senior citizens
  • Tax benefits up to Rs. 1.5 lakhs u/s 80C of the Income Tax Act for tax-saver FDs with a 5-year investment tenure

Post Office Monthly Income Scheme (POMIS)

As the name clearly indicates, this is one of the best investment schemes for senior citizens who want to set up a source of monthly income. It is offered by the Indian government through the Department of Posts. 

You can open a single account or a joint account under this scheme and deposit a lump sum amount for the investment period of 5 years. And you will earn monthly interest on the amount deposited, at the rate fixed by the Department of Posts. 

Eligibility:

Any Indian citizen over the age of 10 can open an account and invest in the Post Office Monthly Income Scheme. A joint account can be opened by a group of 2 or 3 adults. So, you can open a joint POMIS account with your spouse after you have retired.

Risk:

Since the POMIS is an investment option that is backed by the government of India, it carries practically zero risk.

Returns:

Currently, the rate of interest is 6.6% per annum. So, for instance, if you invest Rs. 3 lakhs in this scheme, you will earn a monthly interest of Rs. 1,650.

Features and Benefits:

Here are the top features and benefits of this senior citizen investment scheme.

  • Minimum investment of Rs. 1,000
  • Maximum investment of Rs. 4.5 lakhs for single accounts and Rs. 9 lakhs for joint accounts 
  • Premature withdrawal permitted after 1 year from the date of deposit
  • Deduction of 1-2% of the principal in case of premature withdrawal

Senior Citizen Savings Scheme (SCSS)

This is a savings scheme that has been launched by the Department of Posts exclusively for senior citizens. Here too, you have to deposit a lump sum amount in your account for a period of 5 years. And you will earn interest on that amount. This interest will be paid out to you on a quarterly basis. 

You can either open a single account or you can open a joint account. A joint account can only be opened with your spouse.

Eligibility:

The following individuals can open an account under the Senior Citizen Savings Scheme.

  • Any individual over the age of 60
  • Retired civilian employees over the age of 55 and below the age of 60, if the investment is made within 1 month of receiving the retirement benefits
  • Retired defence employees over the age of 50 and below the age of 60, if the investment is made within 1 month of receiving the retirement benefits

Risk:

Once again, since this is also an investment scheme for senior citizens that is backed by the Indian government, the risk is negligent.

Returns:

The current rate of interest on investments made in the SCSS is 7.4% per annum. So, for instance, if you invest Rs. 3 lakhs in this scheme, you will earn a quarterly interest of Rs. 5,550.

Features and Benefits:

Want to know the key features and benefits of this investment scheme? Check them out below.

  • Minimum investment amount of Rs. 1,000
  • Maximum investment amount of Rs. 15 lakhs
  • Lock-in period of 5 years
  • Investment tenure extendable by 3 years
  • Tax benefits on deposits up to Rs. 1.5 lakhs u/s 80C of the Income Tax Act 

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

I’ll be honest. I hadn’t heard of this scheme before. But as it turns out, this is one of the lesser known senior citizen investment schemes available in India. It is a subsidised pension scheme by the Government of India, and it is offered through the Life Insurance Corporation (LIC). You can invest a lump sum by purchasing this policy, and you will earn a pension on a periodic basis. This pension can be paid out on a monthly, quarterly, half-yearly or annual basis. 

Also, here’s a word to the wise: this scheme is only available up to March 31, 2023. So, if you or any senior citizen you know is looking for safe ways to diversify their portfolio, the PMVVY can be an option only for the next few months. 

Eligibility:

Any individual over the age of 60 can purchase this policy.

Risk:

The pension under this scheme is guaranteed by the government, so the risk is again very low.

Returns:

The PMVVY scheme offers a monthly pension at 7.40% per annum. 

Features and Benefits:

Think this senior citizen investment schemes may be the right fit for you or your parents? Check out its top features and benefits below.

  • A policy term of 10 years
  • Minimum investment amount of Rs. 1,56,658
  • Maximum investment amount of Rs. 15 lakhs
  • Minimum pension of Rs. 1,000 per month or Rs. 12,000 per year
  • Maximum pension of Rs. 9,250 per month or Rs. 1,11,000 per year
  • Purchase price refunded to the beneficiary in case of the pensioner’s demise during the 10-year period
  • Purchase price refunded to the pensioner in case of they survive the 10-year period

Summing it up

These are among the safest investments for senior citizens in India. With these options alone, you can create quite a diversified portfolio. That’s not all. You can simultaneously preserve the corpus you have and earn a steady source of income from your investments. 

As for me, I’ve successfully distributed my father’s retirement benefits across these investment schemes for senior citizens. And next month, he’s all set to check off the first goal on his post-retirement wish list — a 3-week vacation in Europe with my mother. It turns out retirement planning does work, after all!

Frequently Asked Questions (FAQs)

Where should a 70-year-old invest his/her money?

There are many good investment schemes for senior citizens, such as the Senior Citizen Savings Scheme (SCSS), the Pradhan Mantri Vaya Vandana Yojana and even fixed deposits for senior citizens. A 70-year-old can choose from any of these options to invest his/her money.

What are the safest investments for seniors?

The safest investments for seniors are those schemes that focus on capital preservation and offer guaranteed income. Many investments fulfil both these requirements. Some of these are the Post Office Monthly Income Scheme (POMIS), senior citizen FDs, and even the Senior Citizen Savings Scheme (SCSS).

How should an 80-year-old invest their money?

For an 80-year-old, the goal of investing should be capital preservation rather than capital appreciation. Additionally, people in this age group should also aim to obtain guaranteed returns, so they can have an alternate source of income. Keeping these factors in mind, 80-year-olds can choose investment options like fixed deposits, the Pradhan Mantri Vaya Vandana Yojana and the SCSS.

What is the best investment for an older person?

The best investment for senior citizens are those that help preserve the capital and also offer guaranteed fixed returns. Some investment schemes that meet these requirements include fixed deposits, Post Office Monthly Income Scheme (POMIS), and the Senior Citizen Savings Scheme (SCSS).

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