Conservative investors who want to keep their money safe while still earning interest on it often choose Fixed Deposits, and senior citizens constitute a large chunk of that pie. Usually, following retirement, senior citizens mainly look at investment opportunities that will ensure their regular earnings. Hence, the decision to invest in Fixed Deposits.
Whether you are going with a Fixed Deposit for 1 year or more, they will offer a guaranteed return, and the funds will be safe. So, let’s understand what senior citizen FDs are and why they are the best investment option for you post-retirement.
An overview of Senior Citizen FDs
Top financial institutions provide senior citizens with access to Senior Citizen Fixed Deposits (FDs). These are similar to regular term deposit plans but with higher interest rates. In addition to earning up to 0.50 to 1% higher interest than the standard FD rate, you, as a senior citizen, can also take advantage of the other perks associated with these accounts, which are illustrated in the following section.
Those who choose to have their interest regularly compounded after retirement will have a solid source of income. If necessary, they can also take out a loan against the FD. If the FD is a 5 year fixed deposit tax free, the elderly citizen can receive interest and go for a tax exemption.
Benefits of FD for senior citizens
Opening a Fixed Deposit as a senior citizen has many advantages, including:
1. Low-risk investment option
FDs, in general, are low-risk investment instruments. Compared to other options like mutual funds, and ELSS, the guarantee of return on FDs is fixed, and the market fluctuations do not determine it. Furthermore, the interest rate on FDs remains constant throughout their tenure, which is a big advantage.
2. Can offer monthly income
The interest earned on the senior citizen FDs can be converted into monthly, quarterly, half-yearly, or annual payouts. Therefore, as a retiree, you will continue to have a guaranteed stream of earnings.
The flexibility offered by FD in managing the investment could be more attractive. Firstly, you can choose a tenure that suits your requirements. Depending on your plans, you can go with the fixed deposit for 1 year or up to 10 years. Also, you have the liberty to liquidate your deposit whenever you need. So, in case of financial necessities, you can pay a small penalty and get the funds. However, do remember that this is not applicable to the tax-saver FDs.
4. Great collateral option
A Fixed Deposit can be a great collateral option. So, if you have any financial need, you can mortgage this and take a loan against it. It is a great secured loan option where the interest rates will be lower than other unsecured options and lower your overall debt.
5. Great tax-saving option
FDs are a great option if you want to save on paying income tax. You can use the tax-saver FDs to earn income tax deductions. However, remember to check the terms of investment before going ahead.
6. Easily accessible
With the help of online banking, senior citizens can now invest and withdraw their Fixed Deposits through their preferred financial institution’s official website and mobile app.
Eligibility criteria and documentation for the senior citizen FDs
You must be an Indian or permanent resident to open a senior citizen Fixed Deposit. These FDs are also available to senior NRIs who are eligible to open an account through either NRE or NRO. Your minimum age to open a fixed deposit is 60 years.
However, in some cases, individuals over 55 who have retired early may be eligible to qualify for this FD program. Each financial institution has guidelines that may or may not apply to you, so review them before going ahead.
Furthermore, it would be best to keep your id-proof, age-proof, and photograph handy while investing in an FD.
To sum up, typically, the goal of investors of 60 years of age is to ensure a guaranteed return. In this regard, dedicated senior citizen FDs are beneficial. These offer stability and can be a great source of regular income, hence, an excellent investment choice for retirees.