From SCSS to bank FDs & POMIS: What are the top investment options for senior citizens?

Senior Citizen investment options: As individuals approach retirement, securing a steady income becomes a primary financial objective. Senior citizens often prioritize conservative investment strategies to preserve their savings and ensure they can comfortably manage unforeseen expenses.
Proper investment planning is crucial at this stage, and it involves assessing financial needs, estimating monthly expenses, and evaluating potential income sources.Here are some popular investment options that offer security and attractive returns for senior citizens:

Senior Citizens Savings Scheme (SCSS)

Launched by the Government of India in 2004, the Senior Citizens Savings Scheme (SCSS) is a risk-free investment option tailored for individuals aged 60 and above. It provides a guaranteed income stream throughout the investment period.

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Post Office Monthly Income Scheme (POMIS)

The Post Office Monthly Income Scheme (POMIS) offers a reliable investment option with monthly interest payouts, providing steady income for retirees.

Bank Fixed Deposits

Fixed Deposits are a favored choice among senior citizens due to their safety and predictable returns. They offer competitive interest rates specifically designed for retirees seeking stable income.
Banks generally provide senior citizens with an additional 0.50 percent interest rate on top of the regular rates for fixed deposits across various tenures. The interest earned from these deposits is paid out to investors periodically, which can be monthly, quarterly, semi-annually, or annually.
Unlike SCSS and POMIS, bank FDs offer more flexibility in terms of investment duration. Instead of locking in funds for a specific period, investors can spread their money across different maturities using a ‘laddering technique, explains an ET report.
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This approach not only ensures liquidity but also helps in managing the ‘reinvestment risk’. As the shortest-term FD matures, it can be reinvested for the longest duration, and this process can be repeated with subsequent maturing FDs.
When implementing this strategy, it is crucial to ensure that regular income requirements are fulfilled and that the deposits are distributed across various maturities and financial institutions.
Investing in a five-year tax-saving bank fixed deposit can be an effective way to reduce tax liability. This investment option is eligible for tax benefits under Section 80C. However, it is important to note that this type of deposit comes with a compulsory five-year lock-in period, and early withdrawal is not permitted. Although the interest income is taxable, the amount of tax saved in the year of investment compensates for this drawback.

RBI floating rate savings bonds

RBI floating rate savings bonds are an attractive option tied to the National Savings Certificate (NSC) interest rate. The interest rate for these bonds is set at 0.35% higher than the NSC rate, with changes in the NSC rate directly impacting the bond’s rate. While the NSC rate is reviewed quarterly, RBI savings bond rates are reviewed semi-annually.
This ensures that the bonds remain competitive and reflect current interest rate trends. For the July-December quarter, the RBI floating rate savings bonds will provide an interest rate of 8.05%.