5 Best Investment Options for Retirees

Every investor continues to search for the right investment opportunities that can yield lucrative returns. Retirees, however, have special needs based on their investments. For retirees, income stability and capital protection are more essential than capital appreciation. Thus, an optimal portfolio for retirees must offer a balance between income and growth. 

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5 Best Investment Options for Retirees

Following are few investment options which must be considered by retirees - 

1. Senior Citizens Savings Scheme (SCSS)

The Senior Citizens' Saving Scheme (SCSS) is a must-have in retirees' investment portfolios. Anyone over 60 can invest in SCSS from a post office/bank. Early retirees (VRS) will be eligible to invest in SCSS if they do so within 3 months of obtaining their retirement money. There is a 5-year tenure for SCSS, that can be extended further by 3 years until the scheme matures. The SCSS interest rate is presently 8.6 percent per annum, payable quarterly and entirely taxable. The upper cap for saving is INR 15 lakhs. There is a sovereign guarantee for the capital invested and the assured interest payout. Also, investment in SCSS can be claimed as tax deduction under section 80C of the IT Act, and premature withdrawals are allowed

2. Post Office Monthly Income Scheme (POIS)

POMIS is a 5-year investment with an overall limit under joint-ownership of INR 9 lakhs and single-ownership of INR 4.5 lakhs. The interest rate is fixed every quarter and is payable monthly. The investment in POMIS is not eligible for any tax benefit and the interest is taxed in full. The interest is credited to the savings account with the same post office. 

3. Fixed Deposits

Another popular option among retirees is a bank fixed deposit (FD). For retirees, the safety and guaranteed returns go well, and the simplicity of FDs makes it a secure investment. Bank deposits have stability in terms of maturity, unlike SCSS and POMIS. Thus, an investor can spread the sum through various maturities rather than locking funds for a certain period. It not only offers liquidity but also manages reinvestment risk. The 5-year tax saving FD is a great choice for those looking for tax savings. The investment made here is eligible for tax benefit under Section 80C.

4. Debt Funds

As these are mutual funds based on savings in fixed income, they are regarded as safer. Based on the market's results, they give a higher value and rank high in investment returns. They also provide high liquidity, although, before the minimum investment period, you have to pay a withdrawal fee.

5. Tax-Free Bonds

For retirees looking for fixed income, tax-free bonds are an outstanding option. Since government companies usually sell these bonds for a longer-term (10-20years), default risk is significantly smaller and retirees are assured of a guaranteed income (fairly attractive returns). The capital raised from selling these bonds is spent by the government on infrastructure and housing schemes. The interest income is fully tax-exempt and tax deducted at source (TDS) does not apply to these bonds.

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Benefits of Purchasing Retirement Plans

Conclusion

Retirees look for high-return investment choices which offer better security for themselves and their family. Nevertheless, the best investment is one that offers acceptable returns while guaranteeing greater protection. Investing in risk-free investments is therefore as relevant as maintaining a diverse portfolio of investments.