When you reach the victory lap, fondly known as retirement, it is time to celebrate the fruits of hard work and struggle. You make financial and personal goals and tirelessly work all your life to achieve them. But to live the life of your dreams after ceasing to work, you need regular income after retirement.
Choosing investment options for senior citizens that can provide sustained regular income can be challenging.
However, you don’t need to be some prodigious financial genius to pick investment options for senior citizens. Instead, you need to focus on four pillars of smart investing:
- Risk Appetite,
- Tenure,
- Expected returns,
- Your financial goals.
No need for you to spend hours glossing over investment vehicles that generate regular income after retirement. In this article, we have covered 5 top regular income sources senior citizens can choose after retirement.
Senior Citizens Savings Scheme (SCSS-2004)
Senior Citizen Savings Scheme (SCSS) is one of the most loved investment options for the aging population. Launched by the Government of India in 2004, this scheme is tailored to meet the need of senior citizens to generate regular income after retirement.
| Min. investment | Rs. 1000/- & in multiples thereof |
| Maximum investment | Rs. 15,00,000/- |
| Tenure | 5 Years (Can be further extended once for 3 years) |
| Min Age on date of account opening | Personnel |
| Interest Disbursed | Quarterly (1st of April, July, October & Jan) |
| Pre-Closure Penalty | Before 2 years- 1.5 % of the amount deposited After 2 years- 1% of the amount deposited. |
| Tax Liabilities & Rebates | Investments made under the scheme quality for rebate under Sec 80 C of IT Act, 1961. Interest earned is liable for payment of TDS. |
| Interest Rate | Presently 7.4% p.a payable on quarterly intervals |
Considering investment options for senior citizens, say you invest Rs. 1.50 Lacs in the scheme, the investor is entitled to receive a quarterly interest of Rs. 2,775/-.
Post Office Monthly Income Scheme (PO-MIS)
If you are looking for low-risk, guaranteed-return investment options for senior citizens, consider the PO Monthly Income Scheme. This is an excellent regular income after retirement as you land in your no-pay-cheque zone.
The scheme’s best feature-
If you forget to redeem PO-MIS at maturity, you can continue to earn simple interest on the maturity amount for up to two years.
| Min. investment | Rs 1000/- and it’s multiple |
| Maximum investment | For Individual Investor- Rs. 4.5 Lacs Joint Investors – Rs. 9.00 Lacs |
| Tenure | 5 Years |
| Penalty | If withdrawn between 1- 3 years- 2 % 3- 5 years- 1% |
| Tax Liabilities & Rebates | No Tax rebate is available either on investment or interest earned |
| Interest Rate | For October- Dec 22- 6.70 % (revised Quarterly) |
If you invest Rs. 1 Lac in this scheme for regular income after retirement, you can earn a monthly income of Rs. 558/-.
Pradhan Mantri Vaya Vandana Yojna (PMVVY)
The Government of India has launched the PMVVY scheme in partnership with Life Insurance Corporation (LIC). PMVVY is one of the promising government-backed investment options for senior citizens to solve their monthly pension worries.
Among the investment options for senior citizens, subscribing to this scheme entitles you to receive an immediate monthly/quarterly/half-yearly/annual pension. However, the scheme is presently available only till 31st March 23.
| Min. Purchase price | Rs. 1.5 Lacs approx (depends on pension payment frequency) |
| Maximum Purchase Price | Rs. 15 Lacs |
| Tenure | 10 years |
| Min Age on date of account opening | 60 years (No upper age) |
| Min. Pension | Rs. 1000/- p.m |
| Max Pension | Rs. 9,250/- p.m |
| Income Tax Benefits | Exempted from GST. Not eligible for Tax Rebate under Sec 80 C of IT Act, 1961. |
| Pre Mature Withdrawal | Allowed in exceptional cases such as treatment of terminal illness. |
Let us understand with the help of an example-
Purchase Price: Rs. 15 Lacs
Monthly Pension Opted: Rs. 9250/-
Tenure of payment: 10 Years
Total Pension Received: Rs. 9250/- * 12 * 10 = Rs. 11,10,000/-
If the subscriber survives, the maturity benefit received: Rs. 15 Lacs
In case of the subscriber’s death, the maturity benefit received by the beneficiary:
Rs. 15 Lacs + Rs. 9250/- p.m.
Senior Citizen Fixed Deposit
Term Deposit is also among the best traditional investment options for senior citizens. To entice their ideal customers, banks run various deposit schemes. Banks offer interest rates ranging from 6.25% to 7.75%, including a premium of up to 0.50 % for senior citizens.
Fixed deposits are one of the senior citizens’ most preferred investment options because they are completely hedged against capital loss. It also offers the flexibility of periodic payments at regular intervals. You can invest for min 7 days and max ten years.
This is among the few investment options for senior citizens that gives you the leverage to avail of loans at reasonable rates. TDS will only be deducted if cumulative interest payments in a financial year exceed Rs. 50,000/-. Alternatively, you can invest in tax-saving FDs too.
Consider investing Rs. 1 Lac in a Bank offering a nominal interest of 6.25%; you can earn a monthly interest of Rs. 518/-.
Systematic Withdrawal Plan (SWP)
Mutual funds have always piqued the interest of investors looking for investment options for senior citizens due to no TDS on redemptions. First, however, you have to pay capital gains on your earnings.
Say you have 5000 units in the MF scheme. You opt for an SWP of Rs. 1000/- monthly. In the first month, say the NAV is Rs. 10. After the first withdrawal, you will be left with 4900 units (5000- 100). Next month, if NAV hikes up to Rs. 20, you will be left with 4850 units (4900 – 50). If it plunges to Rs 5, the units left would be 4700 (4900- 200). This is how SWP works.
Final Thoughts
As you retire, realign your financial goals harmoniously with your fitness. Then, before your callous spending shaves your wealth by half, choose from the above investment options for senior citizens.
FAQs
Is pre-mature withdrawal allowed in the PMVVY scheme?
Yes, but allowed in exceptional cases such as treatment of terminal illness.
Among the investment options for senior citizens, which is advised- short-term or long-term?
Whether a conservative or an aggressive investor, you should prefer long-term investing for sustained returns and avoiding capital losses.
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