Retirement is the stage of a mixed bag for every person that retires from his or her profession. On one end, you may find a vacuum in work, while on the other hand, you may feel the peace of mind against regular work challenges. Similarly, on the financial front, upon retirement, you are sitting on a huge retirement fund. If you do not handle the fund carefully, you may end up in a financial crunch in a few years. Your post-retirement expenses continue to rise, while there is no regular income like salary in your golden years. Hence, it is highly recommended to build your retirement portfolio with safest tools like fixed deposit for senior citizen, government schemes like Senior Citizen Saving Schemes(SCSS) and Pradhan Mantri Vay Vandna Yojna(PMVVY).
First Thing First: Your Emergency Money
The emergency may come to anyone’s life uninvited, and senior citizens are more prone to age-related illness at any time. Hence, it is strongly recommended to open a fixed deposit account that you can use it in an emergency. Top rated fixed deposits from reputed NBFCs like Bajaj Finance gives you a plethora of options for senior citizen FDs. You can choose to open a cumulative fixed deposit to allow your fund to grow with compounding power. Your interest income is added back to the principle. You can also open Non-cumulative FD if you want to generate regular monthly interest income. Based on the duration of the FD, you can choose to avail the loan against FD or you can break the FD in case of an emergency. Apart from emergency, you can think to open a fixed deposit when you have exhausted the limit in government saving schemes like SCSS and PMVVY.
Senior Citizen Saving Scheme
The Senior Citizen Saving Scheme(SCSS) is a government scheme for a regular income to senior citizens. You can consider parking your retirement fund in the scheme. You can invest up to Rs. 15 Lacs in this scheme. The interest is paid every three months. The scheme aims at regular interest income. However, you must have your emergency money available before you invest in this scheme. If you break SCSS amount, you have to pay penal interest. Moreover, after utilizing your fund from SCSS, you cannot earn regular interest income from it. Hence, you will have financial issues if you venture into investing in SCSS without having separate and sufficient emergency fund. Moreover, another aspect to keep in mind is, under SCSS, you don’t have the opportunity to grow your money. To compensate for this disadvantage, you can consider opening a fixed deposit with cumulative growth option. This action will help you to enhance your income, in the long run, to fight against inflation.
Pradhan Mantri Vay Vandna Yojna
The Pradhan Mantri Vay Vandna Yojna(PMVVY) is also launched by the central government and exercised through LIC of India. Any senior citizen of above 60 years is eligible to open this account with a limit of Rs. 15 Lacs. Unlike SCSS, you have an option to avail interest amount on monthly, quarterly, half-yearly or yearly basis as per your choice. The duration of the scheme is for 10 years and the rate of interest is fixed at 8 percent irrespective of market dynamics to protect the lifestyle of the senior citizens. If you want the money in an emergency, you can prematurely close this account, but with a penalty. Hence, similar to SCSS, it is advisable to keep separate emergency money in the form of fixed deposit. Moreover, currently, fixed deposit rates are much higher than the interest rate in this scheme. You can also choose to invest in quality fixed deposit and select monthly interest income option instead of investing in this scheme. You can use the FD interest rate calculator to check additional interest income earning every month by opening FD instead of opting in this scheme.
Equity Mutual Fund
The senior citizens who have invested sufficiently in fixed deposit and government scheme can consider investing in equity mutual fund in a small proportion (Five to Ten percent of total portfolio). In the long run, equity has a higher potential to earn better returns, to beat inflation. However, in the short run, the return may go negative also, due to the volatile nature of stock prices. Hence, conservative senior citizens must keep themselves away from equity mutual fund.
