4 Best Investment Instruments For Senior Citizens To Generate Regular Income

During your entire working life, you create a pleasant pool for retirement savings. You are assured that through the golden years, this repository will last. And the difficulty lies in this: how can you assure that your investments give you a regular income securely and yet last your whole lifespan? You will need to successfully plan it so that the corpus will last during the pension years. To accomplish this purpose, here are a few tools that you should have in your portfolio.

Pradhan Mantri Vaya Vandana Yojana

The Life Insurance Corporation of India offers Pradhan Mantri Vaya Vandana Yojana (PMVVY)  (LIC). You can contribute up to Rs 15 lakh, the same as SCSS, and it also guarantees a 7.4 per cent return. It provides with no default risk and a longer term of ten years, making it ideal for seniors. A government-backed scheme was scheduled to end on March 31, 2020, but because of its success among retirees, the central government agreed to extend it until March 31, 2023. The interest rate, though, has been cut from 8% to 7.4%. Nonetheless, it is an enticing proposal for senior citizens, promising far better returns than fixed deposits. For instance, for fixed deposits with tenures of 5-10 years, the State Bank of India (SBI) proposes a 6.2 percent interest to senior citizens.

Senior Citizen Saving Scheme

It currently offers 7.4 percent return per annum, one of the best for senior citizens, with the interest being compensated quarterly. The returns are guaranteed because it is funded by the central government, but it falls with a five-year lock-in term. You can deposit up to Rs 15 lakh and depend on liquidity needs for quarterly interest pay-outs. In addition, under section 80C, SCSS also provides tax deductions. Despite the 120 basis point rate cut in March, the SCSS interest rate is among the highest on-demand among financial instruments. “Before exploring other alternatives, we recommend our investors to invest in SCSS. It is a persuasive path for regular income owing to the high and guaranteed rate of returns.

Government Bonds

Financial advisors suggest government securities in lieu of annuities. It is extremely stable as sovereign security, and returns will differ from 6.6 to 6.75 respectively. You should keep investing for 40 years as the bonds with maturity period till 2060 are also open for senior citizens with an exit option too which makes this investment vehicle better than annuities. Such bonds have interest rates that are semi-annual. The deposited principal is safe since they are sovereign bonds. And if kept until maturity, you will also not face the chance of interest rate volatility. If guaranteed yields over the long term are your target, you must select government bonds. Although the investment procedure in government securities was not convenient earlier, you can now invest via the goBID portal of NSE. It is an online portal designed for retail investors who choose to buy treasury bills and dated bonds from the government of India.

Thanks to the stockbrokers, you can now invest in government securities too. The method is very clear, but the perception among retail investors is limited. In addition, the brokers do not receive a lot of compensation and thus do not endorse this approach. On the goBID website, new investors who are members of NSE trading members will have to get registered first. Then you must pick the securities suitable for your purchase and make an online deposit from a bank account linked with your Demat account and you are done. In terms of returns, government bonds, including state development loans, position above annuities. You can also vow these bonds, which is not applicable in the absence of annuities, to generate short-term funds. Likewise, via the BSE Direct portal, you can also contribute. Returns generated on the sale of government securities will be viewed as short-term capital gains (SCTG) and taxable as per the slab rate if sold within a year. Returns will count as long-term capital gains beyond this duration and will be taxable at 10 percent, or with inflation at 20 percent respectively.

Annuities of LICs

Since early, Life Insurance Corporation of India (LIC) (Jeevan Akshay (VII) and New Jeevan Shanti) annuity policies have been aggressively advertised. This is how annuities operate: you will earn a regular pension if you purchase an instant annuity policy and deposit a lump-sum in that policy that is provided by all life insurers. Generally speaking, you get regular earnings, either monthly, quarterly or yearly, if you deposit a lump-sum today. The gains work out for 20-30 years to 5.75-5.9 percent annually. Apart from PMVVY and SCSS, annuities, spanning the entire retirement period, offer fixed returns for a much medium to long term of 30-40 years. Now, annuities can seem like a solution to your search for a long-term option capable of delivering guaranteed returns. Instead of annuities, though, there are better-yielding long-term options such as government securities that you must remember. At the slab rate available to you the total annuity income is subject to taxation. These are not the right decisions yet until the annuity market expands significantly, particularly because 40 percent of the maturity of the National Pension Scheme at age 60 must be deposited in an annuity.

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