What is the best way to invest money and get good returns for a retired person?

best way to invest money

A retired person is generally dependent on a pension (if available) and the interest on savings and investment. In India, a person retires from service at around 60. There is no retirement age for businesspersons and self-employed people. However, a person above 60 is considered a senior citizen.

Senior citizens are more prone to medical ailments, and hence they require adequate liquidity to tide over a medical crisis. However, since they do not have any source of income, they have to depend on their savings. Therefore, let us discuss excellent ways for retired people to invest money and get good and safe returns.

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Here is a list of suitable investment options for senior citizens to earn a decent income.

Investment Option Returns Investment Amount
Post Office Senior Citizen Saving Scheme (SCSS) 7.4%

Minimum Rs 1000

Maximum Rs 15.00 lakhs

Pradhan Mantri Vaya Vandana Yojana (PMVVY) 7.4% Minimum Rs 1.50 lakhs, and the maximum is Rs 15 lakhs.
Post Office Monthly Income Scheme (POMIS) 6.6%

Minimum Rs 1000

Maximum Rs 4.50 lakhs

Senior Citizen Bank FD 3% to 7% It depends on the bank
Tax-free bonds 5.5% to 6.5% NA
Mutual Funds Market Linked (10 to 15%)

Rs 100

Maximum – No ceiling

Here are the brief details of each of the schemes listed above.

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  • A

    Post Office Senior Citizens Savings Scheme (SCSS)

    Senior Citizens can open an FD account in post offices under the SCSS for a maximum of Rs 15 lakhs for five years. The Ministry of Finance regulates the interest rates and revises them regularly. Presently, the interest rate is 7.40%. This interest is calculated on a simple interest basis and credited to the investor’s savings account every quarter ending March, June, September, and December.
    Interest income above Rs 50,000 is subject to TDS. However, senior citizens can submit Form 15H to avoid TDS..

  • B

    Pradhan Mantri Vaya Vandana Yojana (PMVVY)

    PMVVY is an investment program for senior citizens that offers retirement benefits and pensions. LIC of India manages the scheme under the control of the Indian Government. The Government of India announces the interest rate on these investments. Presently, it is 7.4% per annum and payable monthly.
    The investor should be a minimum of 60 years. The minimum investment is Rs 1.50 lakhs, and the maximum is Rs 15 lakhs. The investment can be for ten years. If the investor expires during the tenure, the purchase price is refunded to the nominee. If the pensioner survives the term, the purchase price is returned along with the final pension installment.
    The maximum amount of pension is Rs 9,250 per month. This scheme is in force up to March 31, 2023.

  • C

    Post Office Monthly Income Scheme (POMIS)

    POMIS is a monthly interest deposit scheme available in post offices where the investor can get monthly interest on the deposited amount for five years. The Government of India regulates the interest rates. Presently, it is 6.60%, and the maximum investment for a single individual is Rs 4.50 lakhs. Investment up to Rs 9 lakhs is allowed in a joint account..

  • D

    Senior Citizen Bank Fixed Deposit

    The Senior Citizen Bank FD is similar to the POMIS, except that you deposit the money in a bank. The individual banks decide the interest rates on these deposits, depending on the amount and the tenure. Generally, it is between 3% to 7% per annum. There are no ceilings on the maximum deposit you can make.
    These bank FDs are low-risk investments with guaranteed returns. The interest amount is subject to TDS if the interest exceeds Rs 50,000 in a financial year. However, the depositor can submit Form 15H to avoid TDS.

  • E

    Tax-free bonds

    Various government infrastructure organizations like the Indian Railways, NHAI, NTPC Ltd, HUDCO, etc., offer long-term tax-free bonds where the investment tenure is more than ten years. The interest rate is between 5.50% and 6.50% and is payable monthly. The best aspect is that the interest is tax-free. However, the bonds have a lock-in period until maturity.

    These are low-risk investments. While there is a lock-in period, the investor can sell the bonds on the stock exchange. However, the gains are treated as capital gains and are taxable under Sec 112 of the IT Act.
  • F

    f. Mutual Funds

    Mutual funds are stock market investment vehicles that invest in equity and debt securities. Different types of mutual funds are available. For example, you have equity funds, debt funds, hybrid funds, etc. These investment opportunities are subject to market risk, but they can generate good returns.