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Retirement may be called the golden period of a person’s life, but nobody can deny the fact that it means the end of earning period for many unless one chooses to work after that. For a retired person making the best use of their retirement corpus that would help keep tax liability at bay and provide a regular stream of income is the most important thing they should think about.

Many people get worried when they notice their retirement years are approaching fast to them. Just imagine being at the point of your life where you are about to retire and still haven’t achieved your goals yet. It could be especially worrisome if you don’t have sufficient savings to be able to sustain your lifestyle after you retire. According to a recent national survey, 66 percent of Indians worry about their retirement because of insufficient retirement funds.

Securing retirement money is a must if you want to live a comfortable life without your retirement making a much difference in it. Here is a list of few investment options for the retired to provide for their monthly household expenses penned down by PolicyX:

Senior Citizens' Saving Scheme (SCSS)

senior citizen monthly incomeNationwide considering it as a first preference, the senior citizenship saving scheme (SCSS) is a must-have in everybody’s investment portfolios. The scheme is available only to senior citizens or early retirees, as the name suggests. Anyone above 60 years of age can avail of the benefits of the scheme through a post office or a bank.

Early retirees can invest in the Senior Citizen Savings Scheme provided they do so within one month of receiving their retirement funds. In general, the scheme has five-year tenure, but once the scheme matures, one can further extend it up to three years.

At present, the rate of interest in the Senior Citizen Savings Scheme is 8.6 percent per annum, which can be paid quarterly and is completely taxable. With a spread of 100 basis points, the rates are set each quarter and linked to the G-sec rates. One it is invested, the rates remain fixed for the entire tenure. Currently, the Senior Citizen Saving scheme offers the highest post-tax returns among all comparable fixed income taxable products.

The upper investment limit is Rs 15 lakh and it is allowed to open more than one account. The capital invested and the interest payout, which is assured, has a sovereign guarantee. And last benefit but not the least one, investments in a Senior Citizen’s Savings Scheme are eligible for tax benefits under Section 80C and the scheme also allows premature withdrawals.

Here are the interest rates offered historically on the Senior Citizens’ Savings Scheme:  


Interest Rate

Up to 2012












2017-18 (Q1)


2017-18 (Q2)


2017-18 (Q3)


2017-18 (Q4)


2018-19 (Q1)


2018-19 (Q2)


2018-19 (Q3)


Following are the banks where an SCSS account can be opened

  • Allahabad bank
  • Andhra Bank
  • Bank of Maharashtra
  • Bank of Baroda
  • Bank of India
  • Corporation Bank
  • Canara Bank
  • Central Bank of India
  • Dena Bank
  • IDBI Bank
  • Indian Bank
  • Indian Overseas Bank
  • Punjab National Bank
  • State Bank of India
  • Syndicate Bank
  • UCO Bank
  • Union Bank of India
  • Vijaya Bank
  • ICICI Bank

 In a nutshell, SCSS is a very good scheme for senior citizens who want a decent risk free return on a corpus fund. At an 8.5 percent interest rate and an investment amount of 15 lakhs, the monthly income is stated to be Rs 10,625 per month for each investor.

Also, Check - Types of Investment in India

Post Office Monthly Income Scheme (POMIS) Account

Post Office Monthly Income Scheme is a plan with a maximum cap of Rs 9 lakh under joint ownership and Rs 4.5 lakh under single ownership and a five-year investment plan. The rate of interest is set each quarterly and is currently at 7.8 percent per annum, payable monthly. The interest is fully taxable as the investment in Post Office Monthly Income Scheme doesn't qualify for any tax benefit.

The interest can be directly credited to a savings account of the same post office, instead of going to the post office each month. Additionally, one can also provide the mandate to automatically transfer the interest from the savings account into a recurring deposit in the same post office.

Bank Fixed Deposits

A Bank Fixed Deposit (FD) is also a very popular and meaningful choice of investment within the retirees and as well as common people. You often have heard about it from your parents.  The ease of operation makes fixed deposits a reliable avenue along with the safety and fixed returns, as it goes well with the retirees.

However, the interest rates have been falling for the past few years. At present, it stands at around 7.25 percent per annum for tenures ranging from 1-10 years. Depending upon the bank, senior citizens, get an extra 0.25-0.5 percent per annum.  Also, few banks offer around 7.75 percent to seniors on deposits with longer tenure.

One of the major features of fixed deposits is that unlike Senior Citizen’s saving’s Scheme and Post Office Monthly Income Scheme, bank deposits provide flexibility in terms of tenure. So, despite locking funds for a particular duration, an investor may spread the amount across different maturities through 'laddering'.

It not only manages the ‘re-investment risk', but also provides liquidity to funds. When the shortest-term FD matures, renew it for the longest duration and continue the process as and when various FDs get matured. But remember, while doing so, ensure that your regular income need is met, and deposits are spread across various maturities and institutions.

First, we talk about those looking to save tax, the five-year tax-saving bank FD could be a better option. The investments made under Bank Fixed Deposits qualify tax benefit under Section 80(c) of the Income Tax Act, 1961. Moreover, such a deposit will have a lock-in of five years and early withdrawal is not possible.

Despite the interest income is taxable; there is set-off by the amount of tax saved at least in the year of investment. Most banks offer a rate that is slightly lower than the non-tax saver deposit rates. So it is always recommended to choose wisely and carefully if you want you to go for them.

Mutual Funds (MFs)

The retirement phase in one’s life comes with many downs as well along with the up in the face of a relaxed non-working life. Investing a portion of the retirement funds in equity-backed products assumes importance, as when one retires and there is a likelihood of the non-earning period extending for another two decades or more.

We all know that retirement income (through interest, dividends, etc.) will be subject to inflation even during the retired years. Studies reveal that equities deliver higher inflation-adjusted returns than other assets.

One may allocate a certain percentage into equity mutual funds (MFs) with further diversification across large-cap and balanced funds with some exposure even in monthly income plans (MIPs), depending upon the risk of the profile.

It is advised by the experts of the field that to stay away from thematic and sectoral funds, including mid- and small-caps. The idea behind this is to generate stable returns rather than focus on high but volatile returns. So, if you are a retiree, you can consider keeping a significant portion of debt funds also because of its easy liquidity.

Tax-Free Bonds

Although Tax-Free Bonds are not currently available in the market when it will be available, it can feature in the list of the investment for retired people. Carrying the highest safety ratings for investments beneficial for retirees, Tax Free Bonds are issued primarily by government-backed institutions such as Indian Railway Finance Corporation Ltd (IRFC), Power Finance Corporation Ltd (PFC), National Highways Authority of India (NHAI), Housing and Urban Development Corporation Ltd (HUDCO), Rural Electrification Corporation Ltd (REC), NTPC Ltd and Indian Renewable Energy Development Agency. However, one can anytime buy or sell them on stock exchanges as they are listed securities.

Meanwhile, it is suggested that retirees should keep a note of a few things before investing in Tax-Free Bonds. One should invest in them only if (s)he is sure that (s)he will not require the funds for such a long period of 10, 15, 20 years, one it becomes a long term investment and become mature. Most importantly, the interest is tax-free therefore there is no Tax Deducted at Source (TDS) too.

In the last two tax-free bond issues the effective yield, especially for high tax-bracket investors, compared favorably with taxable investment alternatives available at the same time. However, the liquidity is low in tax-free bonds. Usually, it is listed on the stock exchanges to provide an exit route to investors but price and volume (quoted at exchanges) may play a spoilsport while off-loading them. Also, it usually offers annual and not monthly interest payouts hence may not meet a retiree's regular income requirement.

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For instance

For instance in a declining interest rate scenario, a tax-free bond (face value Rs 1,000) with a coupon rate of 8.3 percent tax free return may be available in a stock exchange at a price of Rs 1,217, with a yield of about 6.4 percent, maturing in 2027 if the investor holds it till maturity. As we already know that the interest payouts are at the coupon rate of the bond, i.e., an investor gets 8.3 percent tax-free income on his investment and the actual return will be 6.4 percent if the bonds are held till maturity.

Immediate Annuities

The immediate annuity scheme by life insurance companies is also an option that is a must to consider for the retirees. The pension or annuity is entirely taxable and currently around five to six percent per annum. However, there is no provision of return of capital to the investor, i.e., the corpus or the amount used to purchase an annuity is non-returnable. Including pension for a lifetime for self, after death to spouse and post that the return of corpus to heirs, etc, there are about 7-10 different pension options.

Under any pension option, the corpus is not returned to the investor. The immediate annuity may not suit an investor who is capable of selecting and building his portfolio. An investor who is capable of selecting and building his portfolio is not someone to whom immediate annuity may not suits.

So it is always advised by the experts of the investment sector to diversify across different investments rather than invest in this scheme if you have the wherewithal to manage your portfolio. Also, it is advisable as the returns offered on these immediate annuities are currently on the low side.

If You Summarise

As they say, old age is a man’s second childhood – except for one fact, i.e. when you are a child, your mistakes are forgiven and there is more than enough time to rectify them. When you are older, you better be cautious, as your mistakes can hurt your dependants and family as well along with you.

Like a child is allowed to go out and play only after he completes his homework, a senior citizen is, implicitly, allowed to make financial mistakes only after he has a sustainable monthly income plan in place. Therefore, PolicyX suggests you make a full proof plan to carry and manage your finances after your retirement, while you are working. After all, precautions are better than cure.

Naval Goel is the founder of He is an Associate Member of the Indian Institute of Insurance`, Pune. He has been authorized by IRDA to act as a Principal Officer of Insurance Web Aggregator.
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