Best retirement instruments a senior citizen can invest

There is so much more you want to accomplish, from travel to entrepreneurship and self-care programmes. Selecting prudently among the most effective investment options for senior citizens will help you realise your dreams. Today, India offers a plethora of lucrative investment opportunities for senior citizens. They are straightforward and effective.

As an investor, you anticipate generating a steady income and accumulating wealth for your post-retirement years. While some investments provide only one of these advantages, others offer both. If you are a retired person with a steady source of income, you may not need to concentrate on the first benefit. Consider allocating a portion of your portfolio to mutual funds that grow over time, accumulating wealth for post-retirement life.

However, suppose you are a salaried or self-employed individual who does not receive a pension. In that case, you may wish to allocate your portfolio to investments that give a steady income stream. As a result, it is advisable to consider the type of investment portfolio you wish to have.

Let’s take a look at investment alternatives for a consistent monthly income:

Numerous investments provide a consistent monthly payment. The following are some of the most effective investment alternatives for retirees and senior citizens:

1)Fixed deposits (FDs) and recurring deposits (RDs) are two of the most popular investment vehicles for retirees. Banks also offer seniors a comparably higher interest rate on FDs and RDs. Under Section 80TTB of the Income Tax Act, older citizens are exempt from tax on interest income up to Rs 50,000 in a financial year.

2)The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a low-risk investment pension plan administered by the Life Insurance Corporation (LIC). It has a ten-year term and provided an interest rate of 7.4% last year. However, only senior individuals over the age of 60 can make a lump-sum investment in the plan.

The monthly pension receivable under the scheme ranges between Rs 1,000 and Rs 10,000, depending on the amount invested. To be eligible for the scheme, you must deposit a minimum of Rs 1.56 lakh and a maximum of Rs 15 lakh up to 31 March 2023.

Remember that investments made in this scheme will not qualify for Section 80C tax deductions; nonetheless, the PMVVY scheme is GST exempt (GST). Additionally, it offers an interest rate comparable to that provided by the senior citizen savings plan (SCSS).

3) SCSS is a good investment vehicle for older citizens seeking long-term savings plans that combine security and extra advantages. The plan is available at post offices and recognised banks around the country.

Not only does this scheme give a higher rate of interest than conventional savings and fixed deposit bank accounts, but you also qualify for tax benefits up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act, 1961.

SCSS has a five-year maturity period with a three-year extension. It offers a 7.4% interest rate for 7.4% p.a. That said, the newer interest rate is applicable from 1 July 2021 until 30 September 2021. SCSS offers one of the better interest rates available in the fixed-income market. Additionally, you can invest up to Rs 15 lakhs. When opening the SCSS account, you must submit the name of your nominee.

Let’s take a look at growth investment alternatives:

Numerous investment options are available to elderly citizens who wish to direct their portfolios toward growth and wealth accumulation. Here are some of the finest investments for retirees and pensioners who want to earn above-inflation returns:

1.Investing in mutual funds is by far the best way to accumulate wealth over time. You can invest in debt funds with a systematic withdrawal plan (SWP), which gives better post-tax returns compared to fixed deposits, especially when you are in the higher tax slabs. If you have a longer horizon with risk-taking capabilities, you can also consider investing in equity mutual funds.

2. Individuals between the ages of 18 and 65 can enrol in the National Pension Scheme. Senior citizens may also extend their tenure up to the age of 70. Taxpayers may deduct up to Rs 1.50 lakh per year on contributions to NPS under Section 80C.

The NPS investment can be made in equities, corporate, or government assets, depending on the individual’s preference under the active option. Similarly, individuals are eligible for additional tax benefits of up to Rs 50,000 per year under Section 80CCD. However, you can elect for automatic asset allocation based on your age.  During the accumulation phase you can accelerate the growth of your investment by allocating a portion of your NPS to equities funds. However, the maximum NPS equity investment is limited to 75%.