In the sunset years, to ensure you have regular income flow such that you are able to meet both recurring as well as non-recurring expenses, investors have to be proactive. While you through diligent financial planning exercise might have created a sizeable corpus as and when you reach your retirement years, there can be still a case where you as a senior citizen or retired individual are scouting out for investment options that are both rewarding with substantial returns as well as safe.
But given the falling interest rate regime, whereby the apex banking entity RBI has resorted to key rate cut for the 5th time in a row and in line banks are reducing their savings account and FD rates, here is why investors especially senior citizens should not divert away from FD investment. Here are given the reasons why:
1. Senior citizens get a higher return by 0.5% in comparison to other retain investor class: Banks in a usual case provide a higher return on FDs i.e. more by atleast 50 basis point or 0.5%. NBFC company on the other hand may provide a higher return by as much as 0.35%, which takes their return to as high as 8.7% in case of select maturities.
2. FDs will enable you accumulate funds for meeting differential needs: Herein depending on your longer-term financial goal, you can resort to laddering your FDs across maturity terms. And then can even opt for auto-renewal facility, for which some of the companies reward you with extra interest rate. So, for short term goals, you can invest in FDs with monthly, quarterly, six-monthly pay outs while for other goals, you can consider investment wherein proceeds including interest income is payable on maturity.
3. FDs can also be kept as collateral to get immediate funds: Some of the NBFCs such as Bajaj Finance allow you to pledge your investment in FD with them and you can get instantaneous loan of up to Rs. 4 lakh without actually breaking your FD investment and paying penalty charges on it.
4. Portfolio rebalancing is one reason: As one approaches his sunset years, one should deploy one's holdings into safe instruments such that their accumulated wealth remains safe. So, amid frauds cropping up in the debt mutual fund space, you should go in for FD investments. AAA company deposits can be another bet that provide better returns than bank FDs.