The bank fixed deposit (FD) is a favorite investment option among many, especially senior citizens. This is usually because, they are considered safe and come with fixed, regular income. They also offer immense growth to the money over the tenor while also delivering fixed periodical interest payments. Hence, regarded as the Best Fixed Income Option After RetirementFD interest rates for senior citizens are usually higher, and retired clients are offered an Attractive interest rate by some financial services.
However, with fixed deposit rates heading south, retirees who depend on the regular interest income need to evaluate different income options. The solution lies in spreading the retirement corpus across multiple fixed income instruments to ensure steady cash flow.
Here are some of the wealth lists that could prove to be the best investment options before them. 5 Best Fixed Income Option After Retirement
1. Senior Citizens’ Savings Scheme
Senior Citizens’ Savings Scheme is a Government-sponsored savings instrument that aims at providing senior citizens with a steady source of income. Citizens aged 60 years and above or those who retirees opting for Voluntary Retirement Scheme or superannuation in the age bracket 55-60 years. Banks and post offices are offering this scheme. The tenure for the scheme is 5 years which is a lock-in period. The scheme has a policy of extension that can be availed only once for 3 years. The interest rate for this is 7.4% per annum and tends to reset every quarter. Once the investment is made, the rate remains constant for the entire tenure. The payout frequency available is quarterly.
As per the Taxability, the interest income generated is fully taxable. Deduction for invested capital up to Rs 1.5 lakh under Section 80C and is subject to TDS. The upper investment limit for the following is Rs 15 lakh per individual. The amount cannot exceed that received as a retirement benefit.
Premature withdrawal is allowed after one year of opening account but is subject to penalty. The penalty is 1.5% of the invested amount if closed after one year; 1% if account closed after two years. Investment has to be done within three months of receiving retirement benefits. One can maximize the benefit by putting Rs 15 lakh each in names of both spouses (Rs 27,750 interest per person per quarter)
2. Pradhan Mantri Vaya Vandana Yojana
Pradhan Mantri Vaya Vandana Yojana is a guaranteed pension product with a death benefit for retirees. Individuals aged 60 years and above can invest in the following yojana that is being offered by LIC. The tenure for the scheme is a lock-in period of 10 years (lock-in). The Interest rate is 7.4% per annum on monthly payout (interest rate capped at 7.75% at any time). The rates tend to reset annually. Once invested, the rate remains constant for the entire tenure
Payout frequency for the scheme is available monthly, quarterly, half-yearly, or annually. Minimum monthly payout is Rs 1,000; Maximum monthly pension is Rs 9,250
Pension amount fully taxable. No deduction for invested capital allowed and no TDS is applicable.
Investment amount can vary as per the choice of payout frequency. The Maximum is Rs 15 lakh (for monthly payout). Premature withdrawal is allowed under exceptional circumstances like the treatment of critical or terminal illness for self or spouse. If the policyholder dies during policy term, the purchase price will be refunded to the beneficiary Pension amount remains constant and doesn’t change with age. If both husband and wife are above 60 years of age, they can jointly claim up to Rs 18,500 as monthly pension
3. RBI savings bonds
RBI savings bonds are floating rate bonds issued only in electronic form.
All resident individuals can invest in these bonds offered by RBI with a tenure period of 7 years.
The rate of interest on these bonds is 7.15% per annum (0.35% above prevailing NSC rate. Rates reset every six months). Payout frequency remains half-yearly (1 January and 1 July) with interest income fully taxable. No deduction for invested capital is allowed and is subjected to TDS.
There is no maximum limit and investment can be done in multiples of Rs 1,000. Premature withdrawal is allowed for specified categories of senior citizens: These are after 6 years for 60-70 age group, 5 years for 70-80 age group, after 4 years for those above 80 years old RBI bonds are not tradable in the secondary market and also not eligible as collateral for availing loans.
4. Post Office Monthly Income Scheme
Post Office Monthly Income Scheme is small savings scheme that allows the investor to generate monthly income. It is open to all individuals for investment aged 10 years and above by the Post Office.
The lock-in period for the scheme is 5 years. With an interest of 6.6% per annum. Rates reset every quarter. The Payout frequency for the scheme is Monthly with the Interest income being fully taxable. No deduction for invested capital allowed and no is TDS applicable.
The upper investment limit for the scheme is Rs 4.5 lakh per individual. Rs 9 lakh for a joint account. Premature withdrawal: Allowed subject to a penalty of 2% if withdrawn within 3 years, 1% if withdrawn after 3 years. The account continues to earn interest for up to two years after account maturity if proceeds are not withdrawn by investors. The applicable rate will be the same as that of a standard post office savings account.
5. Tax-free bonds
Tax-free bonds are fixed coupon-bearing instruments issued by government-owned firms offered by Public sector undertakings, were all resident individuals can invest. The tenure is for 10, 15, or 20 years (at the time of issuance), with the interest rate of 7-9% coupon rate (effective rate lower now owing to higher market price). The interest rate remains fixed with the payout frequency which is Annual.
Interest income is tax-free and no deduction for invested capital is allowed. No TDS is applicable.
The upper investment limit is Rs 10 lakh for retail investors and can be sold on exchanges for premature withdrawal. Currently only available through the secondary market. Investors can substitute tax-free bonds for fixed deposits as the post-tax return is much higher