Senior citizens should prioritize investing on the criteria of guarantee of return and stability for their hard-earned money which they receive post-retirement. It’s best to take the burden of any investment risks while you are still actively working in a job. Once you retire, your risk- appetite lowers, and hence the percentage of market-linked instruments should be reduced in the context of your lifestyle and other sources of income. You should look out for the highest paying and safest options.
One such investment option is the Fixed Deposit. Both banking and non-banking financial institutions provide fixed deposits as an investment instrument. You will receive zero risks with high interest. Also, with some institutions like Bajaj Finance, which is a non-banking financial institution, you can gain an additional 0.35% on the FDs. So, the Employee/ Public Provident Fund you receive on your retirement could be wisely invested in Fixed Deposit.
There are various other saving schemes as below.
Senior Citizens’ Savings Scheme
Keeping in mind the risk-free, and positive returns expectations of the senior citizens, the government introduced a scheme where it can be beneficial for investments made by the retired people. It is known as Senior Citizens’ Savings Scheme (SCSS). Here you’re offered an FD interest of 8.7% per annum which is subject to revision each year.
You can extend this by two years once after the lock-in of 5 years is over.
Other options which remain for senior citizens to save are National Saving Certificates, 5-year tax-free FDs. If they have a higher risk appetite, then they can look at a good ELSS(Equity Linked Saving Schemes) which have a lock-in of 3 years.
Reasons for choosing Fixed Deposits over SCSS
On the one hand, you have the option of SCSS and on another, Fixed Deposit. A Fixed deposit can surpass SCSS in many terms. How? Find it below in terms of Bajaj Finance.
- Flexible tenors: in the case of Bajaj Finance, you get an opportunity to choose from a wide range of tenor options. It can range from 12 months to 60 months. On the other hand, SCSS does not hold this flexibility. It offers a tenor of 5 years which you can later extend up to 3 years more. And for this, you need to submit another form as well.
- Premature withdrawal: In the case of an emergency requirement and early withdrawal you can easily do so with a fixed deposit.
On the other hand, there are conditions applied to the premature withdrawal of SCSS. You are charged a penalty of 1.5% if you withdraw it before 1 to 2 years. And 1% if you withdraw it after two years.
- Loan facility: You can even for a loan against FD for instant liquidity. With Bajaj Finance FD, you can avail up to 75% of loan against your maturity amount of cumulative FD and 60% against non-cumulative FD. On the other side, SCSS does not hold any such provisions of providing loan against the fixed amount.
- Payouts: With fixed deposits, you have the option of choosing the interest payout according to your choice and preference. It can be monthly, quarterly or annually. While SCSS offers only quarterly payment in the months of April, July, October, and January.
- ROI of FD: The FD interest rates are very high, especially in the case of non-banking financial institutions like Bajaj Finance. It offers you as high as 8.75% interest rate and also senior citizens are provided with additional interest of 0.35%.
Whereas SCSS are fixed every year and rarely do they change. The current rate of interest in SCSS is 8.7%.
So, these are some of the reasons why, as a senior citizen, you should go for a fixed deposit rather than SCSS. Although SCSS has its benefits, it is workable only after the age of 60 years. However, you can open a fixed deposit account anytime during your lifetime. Along with flexibility, you also get the cumulative option of adding the interest back for further calculation, in an FD.
Bajaj Finance Fixed Deposits have been awarded CRISIL’s FAAA and ICRA’s MAAA stable ratings. It can provide you with all the opportunities you are looking for as a senior citizen for your investment plans.