How Senior citizens have specific needs
Everyone wishes to have a respectful and stress-free post-retirement life. Making a prudent choice in deciding your investment portfolio can help you beat inflation and maintain your lifestyle after you retire. Old age comes with specific financial needs. You need enough money invested for any medical emergency or routine illness that may surface with age. Since age is a major constraint for senior citizens, they need to invest their precious savings and earnings into an investment option that would give guaranteed returns without much risk on investment.
Various investment options available in the market
The post-retirement options commonly available in the market are unfortunately not lucrative enough for senior citizens. Either they offer high returns but at the expense of high risks, or they offer low-risk options, which fail to deliver the required returns to senior citizens.
Let’s have a look at the various investment options available in the market for senior citizens:
- Senior Citizen Saving Scheme: Depending on the amount of money you have, you can invest anything between Rs. 500 to Rs. 15 lakh in the Senior Citizen Saving Scheme (SCSS). You can invest in this scheme as soon as you retire. The current rate of interest offered on this plan is 7.4% p.a. The application procedure for SCSS is simple, keeping in mind that it is meant for senior citizens and all you need to do is fill up a form and submit it along with the required documents. Otherwise a good investment option, the scheme has its limitations as you can invest in this scheme only for a maximum period of 5 years.
- Post Office Monthly Income Scheme: The Post Office Monthly Income Scheme lets you invest up to Rs. 4.5 lakh if you are a single owner and up to Rs. 9 lakh for joining ownership. The rate of interest receivable on this investment scheme is currently 6.6% p.a. This scheme gives you steady returns and is a safe option as it remains unaffected by market forces.
To make it convenient, senior citizens can request for the returns to be directly deposited in their savings account, if required. However, this plan is not a useful option if you want to invest a huge amount of money, as the maximum investable amount in this scheme is not very large. This plan also has a maturity period of 5 years, so if you wish to invest for a longer-term, you would have to reinvest the money.
- Debt Funds: Debt funds are mutual funds that focus on fixed-income investments. If the market performs well, they can offer the investor a high return. The returns on Debts Funds can be as high as 9%. They are also considered highly liquid, but you will have to pay charges if you wish to withdraw your funds before the minimum investment term is complete. Thus, if you need funds with an immediate effect, you will have to pay charges, which is not a favorable situation for older people, who may need funds for unforeseen emergencies. The higher returns also come with a very high risk.
- Tax-free bonds: The Government issues tax-free bonds to raise funds for a project. The interest returns on these bonds are tax-free, as evident from the name, and there is no fear of non-repayment. The tenor of these bonds may vary between 10 to 30 years, depending on the length of the project. The coupon rate on these bonds ranges between 7.3% to 7.5% but the returns(yield) on these instruments are as low as 4%. Most of the bonds are listed on the exchange and there is no cap on investment and redemption or lock-in period. Additionally, when the economy is on a decline, these bonds do not offer very good returns.
- Fixed Deposits for Senior Citizens: Fixed Deposits are a great investment option for senior citizens. They usually offer a higher interest rate than the regular rates. FDs are also relatively more tax-efficient and help you do better money management. Since you can withdraw an FD at any time, it is a highly liquid investment option. This makes it highly suitable for senior citizens who might need this fund for medical emergencies or otherwise.
Fixed Deposits can be cumulative or non-cumulative. A cumulative FD gives you the benefit of compounding and gives you a higher interest at the time of maturity. For a non-cumulative FD, you can choose the frequency of payout (monthly, quarterly, or annually), as per your requirement. If you are a pensioner, thus having a regular source of income, you can opt for a cumulative FD so that you can get a better rate of interest at maturity. If you do not have a regular source of income post-retirement, you can opt for a non-cumulative FD, so that you can get periodic payouts to meet your expenses.
Why moving from Equity-linked to Debt like FDs will be beneficial as asset allocation for seniors
As evident from the above-mentioned options, equity-linked investment plans come with a high risk. For senior citizens, it is crucial to protect their capital. The higher the age, the lower is the risk you should expose your savings to. Therefore, for senior citizens, debt is ideally the preferred investment option.
Benefits of Fixed Deposits
You can avail of the following benefits with an FD:
- Fixed Deposits for senior citizens have a higher interest rate than regular FDs.
- You can take a loan against your Fds for your urgent financial needs.
- Rurash Financials – an investment management company and an aggregator of financial products brings you multiple fixed income products offering higher interest rate with moderate to negligible risk.
- Fixed Deposits offer guaranteed returns at a fixed rate of return receivable for the entire tenure and principal or face value at the maturity
- The returns on FDs are generally not affected by market fluctuations.
- If you have a savings account at a bank, you can open an FD with just a few clicks from the comfort of your home. You can even set the maturity instructions and renew your FD automatically or get the amount in your account.
- With a cumulative FD, you can get the benefits of compounding on your investment, thus increasing your returns.
- The penalty period for early corporate Fixed Deposits and Bonds withdrawal with RURASH is lesser than regular bank FDs.
Rurash Financials- An aggregator for Fixed Income Products.
RURASH is one of the few investment management firms that understand the senior citizens need to put their investments in safer investments products to generate an alternate source of income for their golden age, thus offering them the best possible fixed income investment instruments which not only beats the inflation but also generate consistent higher returns.
Connect with the Investment experts now at Rurash to know how Corporate FDs help to create a solid investment portfolio for senior citizens.