The best option to invest 20 lac for a senior citizen

After having worked for around 35-40 years of their life, senior citizens need some well-deserved rest. But what about their savings? What about their investments? A few of them do draw a monthly pension, and hence are well equipped to save for the rest of their life. In this post, we will leave investments and other stuff aside, and concentrate primarily on the best saving plans for senior citizens. The government of India dedicates itself towards making our elders’ lives better, and has quite a few attractive saving schemes for senior citizens.
Senior Citizen Saving Scheme (SCSS):
The Government of India gives senior citizens the respect they deserve. Anyone above the age of 60 years can open an account under SCSS and start saving money. Senior citizen savings schemes are long term saving schemes that offer unmatched security and features that are generally associated with government backed schemes. These schemes also offer a relatively higher rate of interest. Lock-in period with the scheme is five years, and an additional period of three years can be added.
Senior citizens can deposit money into their accounts under Senior Citizen Saving Scheme in multiples of 1000, while the maximum amount of deposit has been restricted to Rs. 15 lakh. It it to be noted that these accounts allow only a one time deposit. SCSS targets long term savings, and other long term financial goals to be fulfilled. Such accounts are suitable for senior citizens, because the risk factor is practically nil, and they offer a relatively higher rate of interest. Currently, the rate of interest is approximately 8.5% per annum, on an average.
The intended account holder should be at least 60 years old. As the name itself says, Senior Citizen Saving Scheme is restricted to only citizens above the age of 60. However, there is no upper limit to start saving money through this scheme. The account holder should be at least 55 years old, but not more than 60. This rule works only if the individual has applied for VRS (voluntary retirement scheme). In case you want to open a joint account under SCSS, only the age of the primary applicant is taken into consideration. The age of the other applicant is not taken into consideration.
Bank fixed deposits:
Another scheme for senior citizens by the government of India is fixed deposits. Fixed deposits with banks are locked in for a certain amount of time, that is mandated by the individual himself. These deposits are safe, and generally carry a decent rate of interest.
In a normal fixed deposit scheme, one can expect to get an interest of around 6-6.5% per annum. However, in the fixed deposit scheme for senior citizens (60+ years), the rate of interest goes up to 8% per annum. Arun Jaitley, the Finance Minister of India announced that fixed deposits by senior citizens, up to Rs. 7.5 lakh will earn a fixed rate of interest, of around 8%. The interest on these fixed deposits will be paid on a monthly basis.
Mutual funds:
Once retired, there are a lot of people who do not have any source of income other than their pension. You should keep in mind that the money that you receive when you retire (gratuity, PF, dividends, etc.) are fully exposed to inflation, and will lose their value to time. To avoid this from happening, it is better if you park a part of the money that you have in a high earning scheme, such as equity backed mutual funds. These mutual funds offer a higher rate of interest, but often do come with higher risk, too. It is better to invest in funds with a medium risk-medium return portfolio, because the goal behind this investment isn’t to create high returns with lots of risk, but stable returns for a long time.
When it comes to the classic “debt vs equity” question, the answer is simple: mix and match. It is better if your investment portfolio is diversified. Equity gives better returns, while debt investments are generally very stable. Now, because we’re talking about savings schemes for senior citizens, we are looking for stable returns, as opposed to high returns that come with a higher risk factor.
Pension plans for senior citizens:
The Union Budget also announced lucrative pension schemes for senior citizens. In collaboration with the Life Insurance Corporation of India (LIC), the Government of India has come out with a pension scheme wherein the individuals will get an interest of 8% per annum, for a period of 10 years.
However, experts are in a dilemma because individuals in a higher tax bracket will get a return that is way less in 8%. Basically, 8% rate of interest is before any taxes are deducted. Do look into this, and find out how much net interest you will earn, before parking your money in this scheme.
To know more about all these saving schemes and a few more, log on to Mutual Funds Investment | Tax Saving Mutual Funds | WealthApp.
Post office monthly income scheme:
Post office monthly income scheme or POMIS is one of the most lucrative investments for a retired individual. Like most others, this is also a single time investment. Investment in POMIS is capped at Rs. 9 lakhs in case of a joint account, and Rs. 4.5 lakh. Interest on POMIS is revised quarterly, and is now at around 8% per annum.
This is a scheme with a five-year lock in period, and it must be noted that the interest earned on POMIS is not exempt from tax. Interest earned on POMIS is fully taxable.
So, these are the few investment options that shall allow you to spend golden years of your life without any stress about the finances.

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