Five Investment Options for Senior Citizens
Retirement for most investors means the end of regular earning. It is a non-negotiable goal and everyone should start investing towards retirement from a young age as soon as they start working. Investing your retirement corpus wisely is as important as saving towards retirement. It will also help you live your golden years comfortably without any financial hiccups. Here are a few investment options to build a retiree portfolio.
Health insurance plans Before planning to invest, look for a senior citizen's health insurance policy. Medical expenses tend to increase as you get older. It is crucial to cover yourself adequately for any medical emergencies. Senior citizen insurance plans usually have a 'Co-pay' clause and sub-limits. The co-pay clause means where the insurer has to bear some part of the initial expenses. Insurer chips in only after a certain level of the medical bill have been reached. You must understand the co-payment and sub-limits thoroughly before buying a policy. Once you are adequately insured, you can look at different investment options. You can select more than one investment vehicle to drive you through your retirement journey.
1) Senior citizen Savings Scheme (SCSS) At present, SCSS pays interest at a rate of 7.4 % per annum. An individual aged 60 years or more can invest in SCSS. An individual of the age of 55 years or more but less than 60 years who have retired on superannuation or under VRS can also open accounts. SCSS allows only one deposit not exceeding ₹15 lakh. The depositors may operate more than one account in an individual capacity or jointly with the spouse. The maturity period is 5 years. After maturity, the account can be extended for a further three years within one year of the maturity by giving application in the prescribed format. In such cases, the account can be closed at any time after the expiry of one year of extension without any deduction. In the case of SCSS accounts, quarterly interest shall be payable on 1st working day of April, July, October, and January.
2) Bank fixed deposits (FDs) One of the most popular investment tools with senior citizens is a bank fixed deposit. Usually, the banks offer higher interest rates for senior citizens as compared to the others. For instance, special senior citizen FD offers interest rates higher by 80 bps. A 5-year special SBI FD 'We care' will offer an interest rate of 6.20%.
3) Post Office National Savings Monthly Income Account (POMIS) POMIS is a five-year investment with a maximum cap of ₹4.5 lakh under single ownership and ₹9 lakh under joint ownership. POMIS offers an interest rate of 6.6% payable monthly. Accounts opened under Post Office Monthly Income Scheme has a tenure of five years.
4) Annuity plans Most insurers provide annuity plans. An annuity is a plan that helps you to get regular payment for life after making a lump sum investment. Different insurers offer different annuity rates. Compare the annuity rates before choosing a plan. Also, an insurer provides different annuity options where the holder may direct the insurance company to pay the annuity to his/her spouse after the death of the primary holder. Annuity rates for all the options will vary.
5) Mutual funds An individual can also invest in the debt of hybrid mutual funds based on one's risk appetite. Then for regular income, set up an SWP or systematic withdrawal plan which pays out a specific sum at regular intervals to the investor. If you have the risk appetite and ample liquidity, you can also invest a portion in equity funds which will help beat inflation in the long run. The post-retirement period need not be a short period. You must prepare for what if you outlive your expected life expectancy.
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