As a senior citizen, while safety of capital is of paramount importance, don’t forget to take into account the tax factor. Taxes can actually erode the value of your returns. Also another black hole to watch out for is inflation. Many seniors opt for the security of assured returns and end up finding that the value of their investment has been eroded due to inflation.
You are retired and are looking forward to a relaxed life. You want to spend your time from now to do the things that you would love to do. This can be achieved by smart financial planning to give you the financial security needed in your old age. If you are wondering where to invest, here are some excellent investment options for you.
- Senior Citizens Savings Scheme(SCSS): This is a savings scheme launched by Government of India particularly for senior citizens. All seniors overt the age of 60 years can invest in this scheme. Those who are above 55 years are also eligible to invest in this scheme subject to certain conditions. The scheme has a lower limit of Rs. 1000 and a upper limit of Rs. 15 lakhs. The scheme has a period of 5 years and carries an interest rate of 9%. There is a penalty of 1.5% of the amount deposited, if the deposit is withdrawn before 2 years and 1% if the amount is withdrawn after 2 years but before the expiry of the term.
- Post Office Monthly Income Scheme (POMIS): Are you looking for a guaranteed monthly income? Then monthly income scheme (MIS) offered by the various post offices in the country are ideal for you. You can invest minimum of Rs 1000 and maximum of Rs. 3 lakhs singly or Rs. 6 lakhs jointly in this scheme. You earn 8% interest on your deposit and 10% bonus after the end of tenure, which is 6 years. If you withdraw after a year, 5% of the amount deposited as penalty. However there is no penalty after 3 years.
- Post Office Time Deposit (POTD): This is similar to term deposits offered by the banks. The minimum amount to be deposited is Rs. 200 and there is no maximum limit on the amount deposited. The period for the deposit ranges from 1 year to 5 years and the interest rate ranges from 6.25% to 7%, compounded quarterly.
- Fixed Deposits (FD): Offered by banks and companies, you are better off opting for the bank deposits. Though the interest rates on the bank deposits are lower than the interest rates on company deposits, bank deposits are safer. Always choose deposits with AAA rating, as they are the safest from amongst all the deposits.
- Monthly Income Plans (MIP): If you are looking for higher returns, then these options are suitable for you. These are market linked investment options offered by mutual funds. MIP are a type of balanced funds with 15-20% of their assets in equities. The dividends you get here are tax-free but you have to bear the market risk.
Comparison of various instruments
| SCSS | POMIS | POTD | FD | MIP | |
| Tenure | 5 | 6 | 1-5 | Up to 5 | Indefinite |
| Min. investment | 1000 | 1000 | 200 | Varies | 5000 |
| Max. investment | 15 lakhs | Single -3 lakhs Joint – 6 lakhs | No limit | No limit | No limit |
| Safety | Highest | Highest | Highest | Highest for AAA rated deposits | Slightly risky |
| Tax benefits | None | None | None | None | Tax-free |
| Returns | 9% | 8% | 7.5% (highest) | Varies | Varies |
As a senior citizen, while safety of capital is of paramount importance, don’t forget to take into account the tax factor. Taxes can actually erode the value of your returns. Also another black hole to watch out for is inflation. Many seniors opt for the security of assured returns and end up finding that the value of their investment has been eroded due to inflation. So it makes sense to divide your investment amount between the assured return schemes for capital security and market-linked scheme for higher returns. This will enable you to get the best of both the worlds.
Good advise.please tell in my retired incom how much should be safer and how much market linked
Bonus of 10 % on POMIS is not available now.
Furnish some details about Gold bonds. Will that be better.
The list shoulld be exhaustive for savings option
65%-safer- balance in market related
lakshmanan.s
you should invest 70% in safer side and another 30% in balanced funds(market linked) go for dividend option.
Your recommendations are in-complete.
Why have you not advised retired Sr. Citizens to invest in 8 year deposits of Canara Bank offering 10.5% quarterly compound interest?
None of the schemes recommended by you is near to it.
Please beware;
The most 'Unwanted' investments are in post offices in plans which deduct 'TDS'
These are not properly creditedwith the following details;
a)TAN of the deuctor (503)
b)Section under which deduction is made(504)
c)Date of Payment of credits (505)
d) Amount Paid /Credited (506)
e)Tax deducted (TDS+Surcharge+Educational cess) (507)
f)Tax deposited (508)
g)Date of Booking
These are the areas the post office don't bother to fill in the details and the staff are highly inefficient and indifferent to needs of the clientale
;
To cite my personal case with IT they have not given me a refund of nearly 20,000/- for the years
2009-10; 2010-11 for the foolishness of the postal department in failing to file the details as above.
Why I should suffer for the inefficiency of postal department;
The irony is that IT and Postal departments are both central government related and it looks like these departments can err but as ordinary citizens we cannot;
They would fine us if there is a this lapse,;But they are spared even for their short comings.
"Mera Bharat Mahan'!
Budget for the current financial year 2011-2012 has introduced a new category of senior citizens who have attained 80 years of age who are eligible for higher exemption.