After retirement, when it comes to making an investment choice, the number of risk-averse seniors often exceeds the number of seniors ready to take risks. So, where should seniors invest if they have a low-risk appetite? Retirees normally have three investment needs: lump sum investments for long-term financial goals, investments that can generate a regular income to meet short-term financial goals and highly liquid assets to meet financial contingencies. So, here are some attractive low-risk appetite investment options for seniors.
Bank FDs And Inflation-Indexed Bonds
You may receive a lump sum corpus at retirement that requires a further allocation to different investment products according to your retirement plan. Post-retirement long-term investments need to generate a return higher than the prevailing inflation rate. So, when choosing an investment in the low-risk category, you also need to focus on beating inflation consistently. For the long term, you can invest in bank fixed deposits (FDs) and inflation-indexed bonds. Bank FDs are easy to understand, offer attractive interest, and are covered by DICGC insurance up to the deposit amount of Rs 5 lakh. Inflation-indexed bonds provide a return of 1.5 percent per annum (.75 percent half-yearly), over and above the prevailing inflation rate during the six months. Such bonds are backed by the government of India. For the long term, you can diversify investment to FDs and inflation-indexed bonds.
High-Interest Savings Accounts And Liquid Funds
Risk-averse seniors looking to invest in maintaining adequate liquidity as a contingency fund may choose high-interest savings accounts offered by several banks. Some banks offer up to 6.5 percent interest on savings account balances. Such investments can be further diversified by investing in a liquid fund that also offers a decent return along with high liquidity and safety.
Senior Citizen Savings Scheme (SCSS)
Planning a regular income in retirement is one of the most challenging tasks for many people. A consistent return that is also adequate to meet the regular financial needs can be challenging, especially when choosing only from the low-risk investment options. SCSS can be a very attractive option for risk-averse seniors as they are backed by the government and offer an attractive interest income (Currently 8.20 percent per annum) on a regular basis. Investment in SCSS can be extended in a block of 3 years till the death of the account holder, and such extended accounts can be exited before their maturity, subject to a deduction of the charge at a prescribed rate.
Risk-averse seniors need to choose the investment based on their financial planning, but they also must ensure that the return on their investment can generate a positive real rate of return.
The author is an independent financial journalist.