Most of the people in the senior citizen category are retired. They seek a safe and secured retirement period with a handsome wealth corpus and assured monthly income benefits.
There are multiple types of investment options specially crafted for the benefits of the senior citizens. But not all these investment options guarantee monthly return options. Some of the monthly income plans for senior citizens include Pradhan Mantri Vaya Vandana Yojana, bank fixed deposits, Senior Citizens Savings Scheme, Post Office Monthly Income Scheme along with Floating Rate Savings Bonds. The option for debt funds should also be considered which offers tax-effective returns.
One of the chief reasons to trust these investment options is that the government of the country provides backing for all of these. Therefore, there is no risk of losing the principal.
Monthly Income Plans for Elderly Citizens
- Bank Fixed Deposits
This has been at the top of the investment options list for senior citizens. It depends on the choice of the investor how he/she likes to receive the interest—monthly, quarterly, half-yearly or annually. The average rate of interest of the bank fixed deposits does not exceed the 6% mark. However, certain Small Finance banks offer 7% to 8% rate of interest per annum, depending on the tenure of the deposit. The standard practising policy of all the banks is that they offer a 0.5% to 1% more rate of the interest to the senior citizens.
There exists an insurance coverage of up to INR 5 lakhs for every individual investor of any registered banking organisation including scheduled banks, commercial banks or small finance banks. The insurance backs investments and bank deposits including savings deposits, current deposits, recurring deposits or fixed deposits.
- Pradhan Mantri Vaya Vandana Yojana
The entry age of this scheme begins from 60 years onwards. The Ministry will decide the terms and rates of interest at the beginning of every financial year depending on the last year’s performance. There is the option of 7.40% interest per annum with monthly payout option which resets each year. The rate of interest percentage is liable to change but the policy of assured return remains constant.
The invested money can be withdrawn at any point with a chargeable penalty payment. The periodic payout depends on the choice of the investor—monthly, quarterly, half-yearly or annually. The maximum investment limit is INR 15 lakh. The invested amount can be redeemed under this scheme if the investor or the spouse of the investor is on a terminal stage.
PMVVY is not eligible as an investment instrument under Section 80C of the Income Tax Act.
- Senior Citizen Savings Scheme
Specially designed for senior citizens, this is quite a popular mode of investment. The investor’s age range may be 55 years but less than 60 years are also eligible for the scheme. But, in such a case, the investor must obtain VR or must be under a superannuation scheme and the SCSS account needs to be opened within 1 month of the receipt of the post-retirement benefits. The maximum tenure of SCSS is 5 years with the optimum investment limit of INR 15 lakh. However, the account can be extended for an additional 3 years just once after the maturity of 5 years. The extension request has to be made within 1 year of maturity of the SCSS account. One investor is eligible to maintain multiple accounts under this scheme maintaining the upper limits. The interest received from this scheme is entirely taxable.
SCSS offers an enhanced fixed rate of return when compared to other available options. It offers assured quarterly payouts, providing a return of around 8% p.a. It even reduces the tax liability up to INR 1.5 lakh per annum. The lock-in period is 1 year. The money can be prematurely withdrawn before maturity(5 years) after the lapse of the 1 year lock-in period with a penalty.
- Post Office Monthly Income Scheme
The investor can begin investing in this scheme even before becoming a senior citizen, i.e. before touching 60 years. It comes with a long lock-in period of 5 years and the optimum investment limit is INR 4.5 lakhs per account. It offers fixed monthly payouts and does not offer any tax benefit.
Being a government-backed scheme, there is no risk of principal default but the rate of interest is slightly lower than that of PMVVJ or SCSS.
- Rental Income
One of the conventional methods of enjoying monthly income is renting out a property. The yearly rental income is calculated at 2.5% of the total value of the property. Here, there is minimal default risk but the returns are lesser than any other investment opportunities. Finding a perfect tenant is in itself a challenge. Thus, this investment option does not work out equally well for all the investors.
Summary
The ideal opinion for wealth creation is to invest the money in several schemes and wait for a certain period to function properly. Frantic change of investment mode is not recommended from a practical investment perspective. Consider all the limits and other factors carefully before settling for any senior citizen monthly investment plan for the maximum returns, tax planning, and benefits.