Retired individuals need a steady and regular monthly income. With interest rates falling, they have to ensure that they get the maximum returns from interest bearing instruments.
Senior Citizen Savings Scheme
The Senior Citizens Saving Scheme has to be the best bet for retired folk, because of the interest rates offered on them. The scheme offers an interest rate of 9.3 per cent per annum. Each individual is allowed to open only one deposit and the maximum amount permissible under the scheme is Rs 15 lakhs. An individual of the age of 60 years or more may open the account.
However those of 55 years or more but less than 60 years who have retired on superannuation or under Voluntary Retirement Scheme can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
Company Fixed Deposits
Company fixed deposits are also good bets, to earn a slightly higher interest rates than bank deposits. We wish to emphasize here that individuals should put their money in only safe instruments and not in any and every company fixed deposit. Go for ones that have a AAA rating. For example, at the moment we have fixed deposits of Bajaj Finserv, Mahindra Finance and KTDFC, which are extremely safe deposits.
It's important to remember that retired individuals would get an extra 0.25 per cent interest rate. However, there would be a tax deducted at source that would be applicable on such fixed deposits.
Post Office Monthly Income Scheme
This is another good bet for retired folks, because of the fact that the instrument is extremely safe. The interest rate payable is around 8.4 per cent annually, with the interest credited every month. Investors can open a separate savings bank account in the post office and the credit would take place unto the account accordingly.
The maximum amount of investment permissible under the scheme is Rs 4.5 lakhs. The account can be closed prematurely and en-cashed after one year but before 3 years. However, there would be a charge of 2 per cent that would be applicable if withdrawn before 3 years and after 3 years a charge of 1 per cent of the deposit.
These can be slightly risky, if you opt for funds that have an exposure to equities. If you are willing to take a risk, this could be a good bet, since the interest income is tax free in the hands of the investors. It is difficult to pin point the exact returns that an investor would get from this instruments. It also depends on market conditions.
Retired folk in India have a few options to choose from. Most of the interest earned all of these instruments are very much taxable. We would recommend senior citizens saving scheme, simply because the interest rate is too high to resist. They are also safe and backed by the government. Company deposits can also offer periodic interest like quarterly, half yearly and yearly. But, you need to opt for the safer ones.