Retirement was seen as the end of the line by the elderly for the longest time. It was considered that their earning period is over. However, this notion has changed drastically over the past decade. More and more investment opportunities are being introduced every day for the elderly to make the best use of what they have already earned and help them increase and multiply this asset.
The following are some investment opportunities for the retired:
- Senior Citizens’ Saving Scheme (SCSS): With a five-year long tenure, it can be further extended by three years, it is the most profitable for the 60 year olds and above. Early retirees can invest in SCSS, provided they do so within one month of receiving their retirement funds. As of now, the interest rate in SCSS is 8.6 per cent PA, payable quarterly and is fully taxable. The rates are set each quarter and linked to the G-sec rates with a spread of 100 basis points. These rates do not change after the investment has been made.
- Post Office Monthly Income Scheme Account: POMIS is a five-year investment with a maximum cap of Rs 9 lakh under joint ownership and Rs 4.5 lakh under single ownership. POMIS accounts can easily be opened at any post office in India. The interest rate keeps changing and is currently at 7.5% PA, payments of which are made on a monthly basis. Investment in POMIS doesn’t give one any sort of tax benefit. Its interest is entirely taxable. One major benefit that this scheme provides is that it operates automatically. If one cannot go to post office every month, they can request for automatic transfer of the POMIS interest to recurring deposit through savings account of the same post office.
- Bank Fixed Deposits: A popular choice with the retirees is making a Fixed Deposit (FD). These are more user-friendly as they offer more flexibility in terms of tenure. Unlike other investment options such as POMIS, one does not need to necessarily lock-in their money for a fixed tenure. Different amounts can be spread and kept in different accounts, the benefits of which can be reaped when the deposit matures.
- Mutual Funds: As per their wish and risk profile, retirees can invest a portion of the retirement funds in equity-backed mutual funds with further variation across balanced funds and monthly income plans (MIPs) however, this is one high risk option as one needs to be cautious about thematic and sectoral funds, including those that are mid-and small-cap funds (depending on the size of the companies in which the investments are made.) It would of course be wiser to go for stable returns, instead of high risk-high return ones.
- Tax Free Bonds: Issued chiefly by government-backed institutions such as Indian Railway Finance Corporation Ltd (IRFC), Power Finance Corporation Ltd (PFC), National Highways Authority of India (NHAI), NTPC Ltd and Indian Renewable Energy Development Agency etc. and most carry the highest safety ratings. These are long-term investments and one should think before opting for these as they only mature after 10 to 15 to 20 years after investment.
- Immediate Annuities: Operated mostly by LICs the pension or annuity is taxable and works out to be about 5-6% per annum. The con being there is no provision of return of capital to the investor, i.e., the corpus or the amount used to purchase annuity is non-returnable.