Retirement is a tough period in terms of economic resources since your sources of revenue are low. As such, you need to consider your investment portfolio carefully. Parking it in a savings bank account isn’t prudent. Financially, on any investment you make, your ROI should at least be the risk-free return. It usually means bank deposits. However, since FD interest rates are higher than savings bank deposits, the highest risk-free investment is an FD.
FDs as Investment for Senior Citizens
Market fluctuations are hard to predict. If you’re not well versed with the capital market and still want in, it is better to hire a fund manager for maximising your income. That would involve a significant outlay in the form of fees and brokerage. To shell out that money would mean a reduced gain in your investment. Besides, the guarantee that your investment basket would stay within the parameters of your risk appetite is low. For safe investment, FDs are the best.
FD interest for senior citizensis relatively higher by about 50 basis points. Taken cumulative over the long run, it can make a significant difference. Besides, with the best FD rates you can supplement your income. FDs give the option of redeeming the interest amount monthly, quarterly, bi-annually, or annually.
Benefits of FD Investment
For people who are below their retirement age, FDs serve as a risk-free wealth-maximising tool. For people over the retirement age, FDs work as a reliable source of investment. Since a government guarantee backs most FDs in the public sector, you can park your funds there without worrying about their safety.
Source of Income
With the interest-redemption option in FDs, you can have a steady stream of income flowing in. Banks also have a tax-saving option if your tenure exceeds a certain period and if your funds exceed a certain amount. In those cases, you can claim your income as a deduction under 80C.
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The budget of 2018 provided for higher deductions on interest income for senior citizens. Previously, under 80TT, only an income up to Rs. 10,000 was exempt from TDS. Under the newly introduced 80TTB, an income up to Rs. 50,000 for senior citizens is exempt from TDS. However, for any income exceeding that, TDS is calculated on the whole income.
Positive Growth of Investment
The interest rate of banks on FDs fluctuates between 7%-9%. The wholesale inflation for the year ended 2018-2019 stood at around 3% – this gives you a positive investment growth. It is especially useful when you come into large amount of money. Usually, when people retire, the corpus of provident fund or gratuity amounts to a significant value. Bank FDs are a safe bet in such a scenario.
Making the Right Choice
Several banks are offering competitive prices for FD accounts. All you have to do is identify which bank offers the best features and interest rates. Always look for a bank with an established name. You can expect guaranteed returns at negligible risk.