Best Investment Plans For Senior Citizens In India 2023
More and more senior citizens are now aspiring to be self-sufficient in their sunset years, particularly after retirement. They want a life of leisure that allows them to spend more time with their grandkids, pursue hobbies, or even travel.
Hence, one of the best ways to start this chapter is to have a consistent investment habit so that your money works for you even as you sleep. Sounds easy, right? Well, choosing an investment plan requires planning. Firstly, you should be cognizant that your investments should provide you with a regular income as well as wealth accumulation for post-retirement life.
To ensure these two goals, you need to look for risk-free investment options that offer decent returns. Here’s a rundown of the best investment plans for senior citizens.
Best Investment Options for Senior Citizens
Here are some of the best investment options for senior citizens:
Senior Citizen Savings Schemes (SCSS)
This Government of India-approved savings scheme is considered to be one of the best investment plans for senior citizens in India in 2022 for multiple reasons. Seniors can invest as little as INR 1,000 and up to a maximum of INR 30 lakhs per annum, and start to receive quarterly interest payouts after their first investment. Maximum tenure for this scheme is five years, which can be extended by another three years.
You can open an account with a post office or bank, individually or jointly with your spouse. Another unique aspect of the SCSS is that one can open multiple accounts, thus creating an opportunity to grow your retirement income. The deposited amount, though, must not collectively exceed INR 30 lakhs. Further, the scheme offers tax benefits of up to Rs 1.5 lakh per year under Section 80C of the IT Act.
SCSS is one of the best investment options for senior citizens and comes with no risk due to the sovereign guarantees by the Government of India.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This scheme, offered by the Life Insurance Corporation (LIC), is essentially a low-risk retirement policy that doubles up as a pension plan. Also in the league of the best investment plans for senior citizens in India in 2022, PMVVY provides a regular and fixed income to you as an investor. Additionally, it is considered to be a risk-free and secure instrument.
The scheme can be availed by making a minimum lump sum investment of INR 1.50 lakh; and a maximum of INR 15 lakh per annum for a tenure of 10 years. Pension payouts are paid monthly, quarterly, semi-annually, or annually as chosen by you at the time of purchase.
Further, this pension policy allows you to avail a loan once you have completed 3 years in the scheme. The maximum loan amount is 75% of the purchase price.
For senior citizens, the majority of the portfolio should be invested in debt schemes as your risk appetite decreases post-retirement. However, you also need mutual funds to beat inflation and grow wealth. This makes Mutual funds among senior citizen’s best investment opportunities. Each fund is handled by a dedicated fund manager, whose focus is to optimise all market opportunities.
Ideally, senior citizens should either invest in Debt Mutual Funds or Hybrid Mutual Funds with little or no exposure to equity.
You can choose to invest as little as INR 500 per month and set up a Systematic Invest Plan (SIP), which ensures that the amount is automatically deducted. Over a three to 10-year horizon, one can expect returns of more than 7%.
Post Office Monthly Income Scheme (POMIS)
POMIS is another low-risk monthly income scheme backed by sovereign guarantees and under the competence of the Union Ministry of Finance. It yields an interest rate of 6.6% (as of June 2021), which is attractive for seniors, even though the scheme is not exclusively designed for them. As the name suggests, POMIS account holders receive a monthly payout, which offers a consistent and guaranteed income from the date of opening till maturity.
The minimum investment is INR 1500 while the maximum investible limit is INR 9 lakhs, individually, and INR 15 lakhs, jointly. A joint account can be held by three people, and the investment tenure is five years. Post-maturity, one can either withdraw the maturity amount or reinvest in the same scheme for another 5 years.
Senior Citizen Fixed Deposits
Fixed deposits are an evergreen investment option in India due to the low-risk appetites of investors and their preference for guaranteed returns. The tenure for Senior Citizen Fixed Deposits is typically seven days to 20 years.
Senior citizens are eligible to earn 0.25 to 0.65% higher interest than the general public.
One of the best schemes for senior citizens, these FDs not only offer a higher interest rate but also a monthly interest payout. Those opting for a tax-saver with a five-year lock-in period can claim a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
|Scheme||Eligibility||Rate of interest (subject to change with time)||Investment amount||Tenure||Early withdrawal||Tax implications|
|SCSS||55 yrs & retired/ 60 yrs & above||8.2 %||INR 1000||5 yrs||After one year with penalty of 1.5 %; 1 % after 2 yrs||Tax exemptions on investment amount up to INR 1.5 lakhs under 80C; interest income is taxable as per income slab|
|PMVVY||60 yrs & above||7.4 %||INR 1.56 lakh||Min 10 yrs||98% of initial investment amount in the event of a critical illness – of yourself or your spouse||Taxation on interest as per income slab|
|MFs||18 yrs||7 to 15 %||INR 500 onwards.||No lock-in period.||Yes||Short Term Capital Gains* as per tax slab + Long term Capital Gains taxed at 20% with indexation|
|POMIS||10 yrs||7.40 % (as of june 2021)||INR 1500||5 yrs||2% penalty between 1-3 years, 1% penalty between 3-5 years||Tax exemptions up to INR 1.5 lakhs under 80C + Taxation on interest as per income slab|
|SCFD||60 yrs & above||3 to 8.25 %||INR 5000 online, 10000 for branch visit||7 days upwards||Yes with penalty||Tax exemptions up to INR 1.5 lakhs under 80C for tax-saver plans + Taxation on interest above INR 50,000 as per income slab|
Who Should Invest in the Investment Schemes for Senior Citizens?
Senior citizens aged 60 and above who want to avail themselves of the benefits of a monthly income can explore these plans. The ideal investment horizon should be between three and 10 years, and beyond. These investments come at a reduced risk, which is suitable for the needs of those in their golden years.
While millennials are getting more savvy about their wealth creation and retirement options early in life, senior citizens can also avail unique asset schemes and prepare their corpus for retirement.
While investing, senior citizens should make sure to have a nominee for all your bank accounts and investments, so that transfers to your loved ones can happen without hassles in case of an unforeseen event.
FAQs about best investment plans for senior citizens
Who is eligible for senior citizen schemes?
In India, a resident Indian who is 60 years of age or older is eligible for senior citizen schemes. However, the Senior Citizen Savings Scheme (SCSS) also allows citizens who are 55 years and above and have opted for the Voluntary Retirement Scheme (VRS) to be eligible.
What is the interest rate at the post office for senior citizens?
The interest rate for the Post Office Monthly Income Scheme, which is also open to senior citizens, is 7.4 percent (subject to change every quarter).
Which are the five best investment options for senior citizens in India?
1. Senior Citizen Savings Schemes (SCSS)
2. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
3. Post Office Monthly Income Scheme (POMIS)
4. Senior Citizen Fixed Deposits.
5. Mutual Funds.
What are the safest investment options for senior citizens?
Treasury bills, notes, bonds, and TIPS are some of the safest options. Even though they come with lower interest rates than other investments, their risk factor is the lowest.
Who is eligible for investment in the SCSS 2004 Scheme?
Any Indian resident who has attained the age of 60 years. The age is 55 years in the case of retirement on superannuation, VRS, or a special voluntary scheme. For retired defense personnel, the eligibility age is fifty years.