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For every individual above 60 years of age, the risk appetite changes along with the expectations of returns. After retiring, these people also face the challenge of outliving their savings that they have accumulated over the years.
Even though there are several investment options available for senior citizens, the current interest rate offered by most of them will not help retired individuals sustain their household expenses. To stay clear of this, senior citizens are looking for such financial instruments that minimize the risk of investment and also give assured returns, along with keeping their funds safe.
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Here are some key strategies that senior citizen should keep in mind while investing;
Allocating funds
Usually seen most of the investment options for senior citizens come with long tenure, however, locking funds in investments for a longer duration is not always fruitful. Experts say it is better to look at short duration funds to invest in, wherever possible.
For those with an investible surplus, instead of investing in a staggered manner, experts say one could look at allocation-based strategy. For instance, senior citizens should avoid any long term investment options and should put their maximum allocation in short-medium duration investment options (6 months – 3 years).
Equity allocation
With low return investments, experts say the chances of eating into the corpus for a retired individual is high especially, with increased life expectancy and higher inflation.
Having even a small allocation in equities will help the retired individual to generate additional returns, as the fixed return investment options do not have the potential to suffice the retirement needs throughout the golden years. One can make a small allocation in equity-oriented investments by exposing some portion of one’s retirement corpus into equities from the money which is not needed for a period of 5-6 years.
Returns
Bank fixed deposits, Post Office Monthly Income Scheme (POMIS), Senior Citizen Saving Scheme ( SCSS) Pradhan Mantri Vaya Vandana Yojana (PMVVY), etc. are some of the most popular senior citizen investment options offering regular income payments. To choose the best option, compare the interest rate with the same tenure.
Risk
Investment options that are backed by the government, for instance, most of the fixed income senior citizens investment options – are still open to the risks in different ways. The bank FD, for instance, is insured only up to Rs 5 lakh in each bank including savings account balance. People avoid investing in equity due to high risk and invest in debt, but it also carries its own share of risks. Hence, keep in mind, no investment is totally risk-free.
Tax treatment
Make such investments keeping your own tax slab in mind, as a senior citizen. Some of the investment interests are fully taxable and add to the income of a retired investor.
Having said that, investments such as Senior Citizen Saving Scheme (SCSS), 5-years tax-saving bank FD provide section 80C tax benefit on investment.
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