5 Secure Investments For Retirement Planning

Updated: Friday, March 19, 2021, 14:31 [IST]

Everyone enjoys a relaxing and sustainable retirement time after years of intense employment. Many individuals look forward to retirement because it allows them to rest, and enjoy space with their family. In any case, financial issues are the unwanted instances that someone doesn't want to welcome his or her personal finance space during the retirement years. Individuals nearing their retirement create uncertainty and distress by only thinking about having inadequate funds before they reach retirement age. But, retired people or senior citizens should be mindful of good investment options and ways to generate a steady income so that they can sustain their lives without putting their savings at risk. As a result, senior citizens should think about a portfolio that will provide them with a steady stream of income. For people nearing retirement, here are a few low-risk investing strategies that provide long-term security:

Senior Citizen Savings Scheme

The Senior Citizen Savings Scheme, or SCSS, is a government scheme that provides a quarterly income to individuals who have reached the age of 60 or who have chosen to retire at the age of 55. The current interest rate is 7.4 per cent per annum which is paid on a quarterly basis. By making only one deposit with an initial amount of Rs. 1000 up to Rs 15 lakhs, a senior citizen can open an SCSS account. This small savings scheme of the post office comes with a tenure of 5 years which further can be extended to a block of 3 years. The facility of nomination is available while opening an SCSS account by submitting Form C. Under Section 80C of the Indian Tax Act, 1961, SCSS also provides a tax deduction of up to Rs.1.5 lakh.

Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) regulated by Life Insurance Corporation (LIC) is a pension scheme for senior citizens. The scheme provides a guaranteed rate of return on investment because of the sovereign guarantee. By investing in this scheme a senior citizen can get pension benefit on a monthly, quarterly, or yearly basis. The scheme has a ten-year term for which you will get a Rs 1,000 monthly pension for an initial purchase price is Rs 1.5 lakh. It has an overall purchase price of Rs 15 lakh and comes with a Rs 10,000 monthly pension. The interest rate in PMVVY is determined by the frequency of payout, which can be monthly, quarterly, half-yearly, or yearly. Senior citizens must contribute Rs1,449,086 to earn the full annual payout of Rs1.11 lakh. Depending on the frequency of payouts, the interest rate ranges from 7.4 per cent to 7.66 per cent respectively.

Post Office Monthly Income Scheme (POMIS)

Post Office Small Savings Schemes provides a high rate of interest and are good for those who want assured returns like bank FDs. One such small savings scheme is Post Office Monthly Income Scheme and POMIS account can be opened with a minimum of Rs. 1000 and in multiple of Rs. 100 up to a limit of Rs 4.5 lakh in a single account and Rs 9 lakh in case of a joint account. For the current quarter, the interest rate on the Post Office Monthly Income Scheme is 6.6% per annum. Interest will be paid at the end of each month from the date of opening of the account, and so on before the account reaches maturity. You cannot withdraw the amount invested in a Monthly Income Scheme account before 5 years if you open one with a post office. If you withdraw your corpus before the lock-in date expires, you will be charged a penalty on the withdrawal amount, which is calculated based on the time of withdrawal. There is a 2% penalty if you redeem your investment within the first and third year, if you withdraw within the third and fifth year, you will be charged a 1% penalty.

National Pension System (NPS)

Individuals between the ages of 18 and 65 can invest in the National Pension System. The account can also be extended up to an age limit of 70 years which ensures that senior citizens can consider this scheme which is backed by the government of India. Senior citizens can also extend their tenure until they reach the age of 70. Taxpayers can deduct up to Rs.1.50 lakh in NPS contributions under Section 80C of the Income Tax Act. Individuals are also eligible for additional benefits up to Rs.50,000 under Section 80CCD. The money invested in the NPS system is allocated across equity bonds, debt bonds, or both, based on the subscriber's preference. As a result, NPS has no fixed interest rate, and a senior citizen's portfolio will only benefit from market-based returns. 60 per cent of the NPS corpus is tax-free as it matures. The remaining 40% of the NPS fund must be used to purchase an annuity for a monthly pension benefit. You can also choose from one of the eight NPS pension fund managers. SBI, UTI, LIC, Aditya Birla, HDFC, Kotak, ICICI Prudential, and Reliance Capital are the fund managers involved. As a result, NPS returns are related to the performance of the equity or debt market. To know more about current NPS returns, click here.

Senior Citizen Fixed Deposit Schemes

Some leading banks of India such as State Bank of India (SBI), HDFC Bank, ICICI Bank, and Bank of Baroda provide special fixed deposit (FD) schemes to elderly people. These banks are promising higher interest rates on term deposits under this scheme than they are currently providing to non-senior citizens. Senior citizens can get 100 basis points more on these deposits at Bank of Baroda (BoB). A senior citizen will get a higher rate of 6.25 per cent for depositing for a tenure of above 5 years to up to 10 years at BOB. Similarly, on these deposits, ICICI Bank gives an 80 basis point higher interest rate. The ICICI Bank Golden Years FD scheme pays a 6.30 per cent annual interest rate to senior citizens. HDFC Bank, on the other hand, pays a 75 basis point higher interest rate on these deposits. The interest rate on a fixed deposit held by a senior citizen under the HDFC Bank Senior Citizen Care FD will be 6.25 per cent. At last, the leading commercial bank of the country State Bank of India offers a special FD scheme for senior citizens that provides an interest rate that is 80 basis points (bps) higher than the general public. SBI currently offers a 5.4 per cent interest rate on five-year fixed deposits to the general public. If a senior citizen deposits money in a fixed account under the special FD scheme, then he or she will get a higher interest rate of 6.20 per cent respectively. These special FD schemes are in effect for senior citizens till 31 March 2021.