After you attain the age of 60, no matter how young you remain at your heart you are immediately put into the ‘senior citizen’ category. The retirement is at the doorstep, your last day is celebrated at work and all your achievements are recalled. The income stops, but the expenses do not and only saving cash is not enough. With all time existent inflation these savings will evaporate in no time. It is important to establish a regular income stream after retirement so that your senior citizenship is equally comfortable. There are various investment options in the market that makes your life congenial.
Senior Citizen Savings Scheme (SCSS).
It is the most popular scheme available in the market. The minimum age of entry is 60 and that can be retracted to 55 if someone takes involuntary retirement. The minimum investment limit in this scheme is ₹ 1,000 and the maximum limit is ₹ 15 lacs. This investment qualifies for deduction under Section 80C of the IT Act. The scheme has a maturity period of 5 years but it can be extended for three years after the scheme matures. An investor can foreclose the account after a year. If the account is closed before two years, the penalty is 1.5% and after two years, the penalty is 1%. It carries an interest rate of 8.6% to 9.3%.
Post Office Monthly Income Scheme (POMIS).
One can get assured monthly return from investment under this scheme. The minimum amount of deposit is ₹ 1,500 and the maximum is ₹ 4.5 lacs in single account and ₹ 9 lacs in joint account. There is no section 80C benefit for POMIS investment. The interest income from POMIS is taxed as per the income tax slab of the investor. The scheme runs over a 6 year period and offers a return of 8% per year. Also these investments are eligible for a 5% bonus on maturity. Premature withdrawals within three years are subject to a deduction of 2% of the amount invested. After three years, the amount of deduction is 1% of the amount invested.
Post Office Time Deposits (POTDs).
It is essentially a fixed deposit from the small savings segment. The minimum investment is ₹ 200 and above that in multiples of 200 with no limit on the closing amount. The scheme holds a tenure of 1 to 5 years and the interest in compounded quarterly but paid annually. The rate of interest varies from 7.1% to 7.9% depending on the length of your tenure. The interest income is subjected to tax. The five-year deposit is eligible for tax deduction under section 80C of the Income Tax Act.
Fixed Deposits (FD).
This is the most desired and conventional way of investment. This option never gets old. There is no minimum amount of investment. You can invest your money for a period of as low as 7 days to as long as 10 straight years. The interest rate varies with the amount, tenure and with bank to bank. Most banks offer senior citizens a special rate on fixed deposits, which appears to be 0.5% higher than what below sixty people get. The interest rate generally varies between 8 to 8.5% depending upon the bank. The applicant can opt for crediting of interest to a savings bank account on quarterly, semiannual or annual basis. There is also an option for reinvestment of interest. It does not enjoy the benefit of tax exemption.
Pension Plans (Varishtha Pension Bima Yojna).
This scheme is run by LIC and its aim is to provide a regular income to the senior citizens of this country. It is an immediate annuity plan offering an interest rate of 9-9.38% to senior citizens. The individual has to be 60 years or more and for a monthly pension the minimum purchase price is ₹ 66,665 and the maximum is ₹ 6,66,665. The policy can be surrendered after 15 years for a full refund and at 98% in case it is surrendered for any emergency purpose before 15 years have passed. A loan, of not more than 75% of the premium, is also offered after completion of three policy years of the LIC Varishtha Pension Bima Yojana. The lack of liquidity is a major concern.
Other investment options are Mutual fund monthly income plans, fixed maturity plans, National savings certificates, Equity linked savings schemes, reverse mortgage, rent from real estate, Dividend from equity, government bonds etc. One is advised not to invest all his/her savings in one scheme, but to understand his/her money and financial needs then spread your investment over different schemes. Do a thorough research and be patient for returns.