An ideal investment portfolio of a senior citizen should be a perfect combination of income and growth. The specifics of the portfolio of a senior citizen should depend on the requirements of the individual. For a senior citizen getting a pension from their employers or the generation of income would not be a concern. Instead, their portfolio should be growth-oriented. Regular income generation is important for people who do not get any pension after retirement. So, this guide will help senior citizens understand the different ways they can plan your investment in 2020.
Investments that can drive monthly income:
1. Fixed Deposits (FDs) and Recurring Deposits (RDs):
Senior citizens are granted higher interest rates on their investments in FDs and RDs. You can apply for a fixed deposit at any bank or post office according to your convenience. Senior citizens are granted with an additional tax-free interest income of up to Rs. 50,000 per year in an FD account and RD account. You can compare the best FD rates provided by different banks online.
2. Post Office Monthly Income Scheme (POMIS):
POMIS is a monthly savings scheme that is backed by the government. It allows the investor to save a specific amount monthly. The interest is applied to the investment and paid off to the depositor every month. There are no market risks involved in this investment, so it is favourable for the retired senior citizens.
- For solo account holder, maximum investment in POMIS is capped at Rs. 4.5 lakhs.
- For joint account holder (up to 3 individuals), maximum investment in POMIS is capped at Rs. 9 lakhs.
3. Senior Citizens Saving Scheme (SCSS):
SCSS is a government-backed saving scheme designed for senior citizens. It is more secure than a fixed deposit. An SCSS is a five-year scheme that can be extended for another three years. The interest rate provided under SCSS is 7.4%, and they are tax-deductible up to Rs 1.5 lakhs per annum.
Investments that can drive regular growth:
1. National Pension Scheme (NPS):
The age eligibility to enrol in NPS is from 18 to 65. So, a senior citizen can get benefited from this scheme too. Once created, the NPS account can be extended to an age limit of 70 years. The investments made in NPS are tax-deductible up to Rs. 1.5 lakhs. The NPS invests money in debt and equity funds according to the choice of the investor. So, interest rates are not fixed in NPS, but it can help grow the money at a faster rate.
2. Mutual Funds (MF):
Mutual fund investments are meant for wealth creation with an element of growth. Senior citizens can opt for a portfolio of their credit risk. Among the equity funds, large-cap funds are relatively low risk while the small-cap funds are subject to high risks. A particular (ELSS) category of mutual funds is eligible for tax deductions.
There are various investment options available for senior citizens to invest according to their requirements and life goals. You can get assured returns by opening an FD account, while you can grow your money by investing in MF schemes.