“If you’re saving, you’re succeeding.”― Steve Burkholder
India with a population of 106 million elders and a majority of this population is not covered under any formal retirement income scheme. With demographic challenges, there is a large population of elders that do not work, and as life expectancy increases, financial planning for senior citizens is imperative. Planning your retirement and ensuring a steady income for later years is important for economic freedom and overall wellbeing.
Retirement is a major turning point in an individual’s life and it mostly means focusing on getting a steady and regular flow of income while keeping tax liability at bay. However, in India, the age of retirement is sixty years whereas life expectancy can be stretched to eighty years and above. Therefore, it is very important for elders to do proper financial planning and investment, to be able to take care of the monthly expenses and have a strong financial resource.
To ensure personal wellbeing and independence in old age, it is very important to have a regular flow of income post-retirement. To ensure financial freedom, it is important to invest your savings in low-risk schemes with good returns. Mostly, elders prefer not to invest in highly volatile market schemes and prefer safer options while trying to make major financial investments.
Before we look at the Investment options, it is necessary to understand the risks involved and the returns generated on these investments. Therefore, it is important to keep a few things in mind, like Investing in schemes that guarantee steady cash flow, generate good income and are low risk, while also giving varied options of investment.
There are few Investment Options listed for senior citizens to lead an independent life. Planning your retirement and investing in schemes that provide good income will also provide protection against future uncertain events and illnesses.
Senior Citizens’ Savings Scheme (SCSS)
The Senior Citizen Scheme is available for the seniors at the post office and banks, having a five-year tenure which can also be stretched to three years as the scheme matures. The rate of interest is 8.6% p.a, which is taxable and can be paid quarterly. The maximum amount deposited could be as high as fifteen lakhs and a person is entitled to open more than one account enjoying tax benefits as well and can withdraw the money prematurely when needed.
Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Scheme provides a 7.8% p. a. rate of interest and is paid monthly. The maximum amount invested could be nine lakhs and can be opened by a single account holder or joint account with a spouse or a relative. The scheme doesn’t provide any tax benefits and the interest is directly transferred into the savings account of the account holder.
Mutual Funds are subjected to market risks and therefore it is advisable to protect yourself by investing a certain percentage into equity mutual funds and large capital and balanced funds as these are more stable and reliable and ensures to keep the monthly income flowing.
Most elders invest in fixed deposits as they consider is safe and lucrative, however, they have low returns and prone to inflation and market fluctuations on interest rates and don’t provide good tax benefits.
National Pension System
National Pension System enables elders to invest in equity and debt funds and ensure a steady income. It is an initiative by the Indian government and was introduced in the year 2004, and allows individuals to invest a portion of their salary in equity and debt funds. The eligibility criteria are eighteen to seventy years and pay annuity income every month post-retirement.
National Savings Certificates (NSC)
National Savings Certificates is issued by Post Office and are like fixed deposits offering 8% returns for a fixed 5-year term. The interest is reinvested until it’s matured and is given along with the investment amount. The savings made under this scheme are exempted from tax.
The ideal financial investment for senior citizens should provide a balance between both revenue and growth, and also the prerequisite of the individual. For elders who are getting a pension from their employers may not need a steady inflow of cash but need more growth and revenue-generating schemes. However, those who are self- employed or working in an unorganized sector may not be getting pensions at all and therefore require schemes and investment that will provide and ensure a steady income every month.