Senior citizens can generate regular income throughout their retirement through various financial instruments. For instance, banks give senior citizens an additional interest of 0.50 per cent on fixed deposits. The interest rate in savings bank accounts is also higher for them. Likewise, seniors can diversify their investment portfolio with other financial instruments that give handsome returns, liquidity, and flexibility for various needs and time horizons. Seniors can also use the ‘laddering technique’ for FDs to ensure income at various maturity periods. This strategy provides liquidity and helps manage re-investment risk. There are also tax-saving fixed deposit schemes where they can claim tax benefits under Section 80C tax.

Senior Citizen Savings Scheme

The Senior Citizen Savings Scheme (SCSS) is an investment option for seniors aged 60 and over, offering regular interest income. The scheme has a lock-in period of at least five years, but early withdrawals attract a penalty. Deposits must be at least Rs 1,000 and up to Rs 30 lakh. Accounts can be opened individually or jointly with a spouse. If the deposit exceeds Rs 1 lakh, cheque payments are required. The scheme is eligible for tax exemption under Section 80C.

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Post Office Monthly Income Service (POMIS)

POMIS is a five-year investment option for senior citizens and allows a maximum investment of Rs 9 lakh for an individual account and Rs 15 lakh for a joint account. Interest is paid monthly from the opening date until the investment matures. However, POMIS does not qualify for tax benefits, and the interest earned is taxable. Premature withdrawals are not allowed, and if an account is closed after a year and before 3 years, a sum of 2 per cent will be deducted from the principal, and the remaining amount will be returned. Premature closure can be done by submitting a prescribed application form and passbook to the concerned post office.

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RBI Savings Bonds

RBI savings bond interest rates are tied to the National Savings Certificate, which is 0.35 per cent higher than the NSC interest rate. The interest rate for RBI floating rate savings bonds is reviewed semi-annually, unlike the NSC which is reviewed quarterly. The minimum investment for these bonds is Rs 1,000, with a fixed maturity of seven years. Early withdrawals are allowed for investors aged 60 and above, subject to a minimum lock-in period. These bonds do not offer compound interest and are paid semi-annually on January 1 and July 1 each year.