Recent cuts in repo rates by the Reserve Bank of India have resulted in falling interest rates for fixed deposits. This has naturally affected the income of senior citizens who are dependent on such investments for regular income.
With major banks such as Bank of India ending the special 400-day FD scheme (interest rate of 7.3%) and HDFC Bank cutting savings account interest from 3% to 2.75%, retirees need to scout for safer options with higher returns.
If you happen to be one of those senior citizens wondering where to invest in order to ensure stable and higher income in the backdrop of falling FD returns, here is an extensive guide on the subject.
Best Investment Options for Senior Citizens After FD Rate Cuts
Senior Citizen Savings Scheme (SCSS)- Interest Rate 8.2%
A very safe and lucrative scheme indeed, SCSS provides an annual interest rate of 8.2%, paid quarterly. It comes with a tenure of 5 years (extendable by an additional 3 years), thus generating regular income alongside tax benefits under Section 80C.
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Post Office Monthly Income Scheme(POMIS)-Interest Rate 7.4%-7
For those requiring monthly payments, POMIS may be the solution. It graciously offers 7.4% interest per annum, thus providing a steady stream of cash. It is a secure option with a 5-year lock-in period and backed by the Government of India.
National Savings Certificate (NSC)-Interest Rate 7.7%
The NSC is another option for the low-risk, high-return segment with an interest rate of 7.7% per annum compounded annually. For the conservative type of investor, the five-year maturity period plus the tax benefits under Section 80C make it smart money.
AAA-Rated Corporate FDs-Higher Returns Than Bank FDs
Preeti Zende, SEBI-registered investment advisor, advises about AAA-rated corporate FDs of reputed companies. These often offer higher interest rates than banks’ FDs, with possible monthly payout options. However, check the financial credibility of the company before investing.
Long-Term Fixed Deposits-Lock Above Interest Rates Now
Vishal Dhawan, founder of PlanAhead Financial Planners, advises long-term vs. short-term deposit FDs with interest rates attributed to further downward spiral expectations. As interest rate cycles usually remain for 2-3 years, locking in on elevated interest rates can guarantee better returns in the long run.
Equity (Moderate Risk Takers)
Equity markets are still risky, and any allocation of 10-20% of one’s savings in hybrid mutual funds, balanced advantage funds, or large-cap/index funds will enhance overall returns. Risk is minimized by the process of diversification, thereby making it a feasible chance for somebody who can afford some measured exposure.