A Guide to Safe Investment Options for Retirement

You may be looking forward to a life of retirement where you can shrug off the pressures of the daily grind. This is easier to achieve when you have sufficiently planned for your retirement in advance.

senior citizen fixed deposit

Here are six investment vehicles that can give you the financial foothold to achieve a stress-free life after retirement: 

#1 Post Office Monthly Income Scheme

A steady stream of income is what you will require when you retire. The Post Office Monthly Income Scheme (POMIS) allows you to have regular income by automatically crediting the interest in your bank account every month. 

This is a taxable five-year scheme. POMIS carries an annual interest rate of 7.5%. You can invest up to Rs.9 lakh together with your spouse or Rs.4.5 lakh individually. A POMIS account can be opened in any post office and even transferred from one to another. 

#2 Senior Citizen Savings Scheme

This is one scheme that is tailor-made exclusively for senior citizens. The tenor of an SCSS is also five years; however, it can be extended by three years on maturity. It allows anyone aged at least 55 but below 60 who has voluntarily retired to open an account, provided it is done within a month of receiving the retirement benefits. 

At 8.4% interest, payable from the deposit date four times a year, it offers the best post-tax returns among taxable fixed income instruments. You can invest up to Rs.1 lakh in cash or up to Rs.15 lakh by cheque in this scheme at banks or post offices.  Although the interest is taxable, SCSS qualifies for tax redemption under Section 80C. 

#3 National Savings Certificate: 

More popularly known by its abbreviation NSC, this investment option is a government savings bond with a five- as well as ten-year tenure. It is well suited for small savings and income tax saving purposes. You are entitled to tax benefits under Section 80C of Income Tax Act, 1961 when you invest up to Rs.1 lakh in a year. 

The deposit can be pledged as security to avail loans from banks too. The interest is about 7.8% without TDS. Already in its VIII issue, NSC works best if you buy a certificate every month for five years and then reinvest the proceeds on maturity. 

#4 Bank or Company Fixed Deposits: 

Fixed deposits yield better returns than a savings account. As of today, you get an interest rate of about 7% annually if you open a fixed deposit for any period between 1 to 10 years. Senior citizens get 0.25 to 0.5% more when they open an FD. Some banks offer 7.75% interest if the deposit is kept for longer durations. 

These longer duration deposits attract a tax rebate under Section 80C of the Income Tax Act, 1961. The Senior Citizen Fixed Deposit offers interest up to 8.10%. With as little as Rs.25,000, you can open an FD under the cumulative or non-cumulative option. The non-cumulative interest ranges from 7.60 to 8.10% depending on how long you park your investment and whether you want the interest to be paid monthly, quarterly, semi-annually or annually. The interest rate range on the cumulative option varies from 7.65 to 8.10% depending on the period chosen. These fixed deposits have been awarded the highest stability ratings by both ICRA and CRISIL. 

#5 Reverse Mortgage: 

A reverse mortgage is essentially a type of loan in which you can borrow money against the value of your home. Instead of you paying the lender, the lender pays you monthly installments in the form of a fixed monthly payment. You need not repay either principal or interest on the loan unless you move away, sell your home or pass away. 

Reverse mortgages are planned in such a way that that the loan amount does not exceed the value of the pledged asset at any time. Reverse mortgage thus allows senior citizens to survive their retirement period by supplementing their income through asset liquidation. 

#6 Immediate Annuities: 

Senior citizens can also accumulate additional income through immediate annuity schemes offered by various life insurance companies. Immediate annuity payments are basically contracts where a single lump sum payment is made in exchange for guaranteed income that starts immediately. 

Immediate annuities are suitable for retirees who fear they may outlive their savings or retirement corpus. Immediate annuity payments are, however, are irreversible once the payment has been made. This could pose a problem if the retiree requires the sum invested to cope with a contingency. 

These safe investment vehicles can be a boon for retirement life as they offer safety along with the growth of wealth.