When an employee retires after a few years of service, he/she gets a lump sum, thanks to the Employees’ Provident Fund and gratuity. For most employees, whatever they get under these two heads forms the bulk of their post-retirement funds, since many fail to invest regularly in equities, mutual funds, NPS and PPF to build a solid corpus in a parallel measure.
Therefore, post-retirement funds need to be invested with extreme caution. First, it has to be safe – safety comes on top of the agenda for senior citizens. Second, if is it a guaranteed-return instrument, the rate of return has to be highest. Third, it must have a certain degree of liquidity since senior citizens can have financial emergencies anytime.
Senior Citizen Savings Scheme (SCSS)
At 8.2% interest, Senior Citizen Savings Scheme (SCSS) offers the highest rate of interest with a sovereign backing. It allows one to invest a maximum of Rs 30 lakh in a bank or post office. It will generate a quarterly interest of Rs 61,500 and the total interest earned in 5 years is Rs 12.30 lakh. However, one can extend it for 3 more years after the expiry of 5 years.
Post Office MIS
The Post Office Monthly Income Scheme, popularly known as MIS, offers 7.4% annual interest rate. One can invest a maximum amount of Rs 15 lakh in a joint account and Rs 9 lakh in a single account. If one invests Rs 9 lakh, the interest is Rs 66,600 a year or Rs 5,500 a month. An investment of Rs 15 lakh will fetch Rs 1.11 lakh a year or Rs 9,250 a month.
Fixed Deposits (FD)
FDs offer steady, predictable returns and, therefore, are popular with senior people. All banks offer an additional interest rate of 50 basis points to all customers above the age of 60. Major banks offer interest rates close to 8% and even higher for senior citizens.
Mutual funds
Mutual funds can provide higher returns for those who can take a certain degree of risk. Over the long term, equity mutual funds can deliver an average 12% returns while debt funds are less risky but fetch lower returns.
With no regular cash flow from work, inflation is the biggest enemy of senior citizens who have limited capital to survive a few decades. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
