Senior citizen fixed deposits (FDs) are investment tools specifically designed for individuals over the age of 60 years or above. Such FDs are known to provide several benefits directed towards meeting senior citizens’ needs, and it’s crucial to consider various factors before investing in such schemes.
Interest rates tend to play an important role in determining the returns on senior citizen FDs. Generally, such deposits provide higher interest rates than regular FDs, making them an ideal option for retirees aiming for consistent income. However, it’s important to remain abreast of prevailing interest rates to ensure that the investment remains competitive.
Typically, senior citizens earn an additional 0.50% interest on their FDs compared to regular FDs. This could influence the total earnings in a significant manner, especially for longer tenures. For instance, in case a regular FD offers 7% interest for a 5-year tenure, a senior citizen FD might offer 7.50% interest for the same tenure.
The tenure of the FD is another crucial factor to take into account. Senior citizens should opt for a tenure that aligns with their financial goals and fund requirements. Short-term tenures are likely to provide flexibility, while longer tenures offer higher interest rates.
Similarly, tax implications should also be an important consideration. Generally, the interest earned on FDs is taxable. However, senior citizens are eligible for a higher exemption limit. It’s suggested to remain updated with the latest tax rules and consider the after-tax returns when considering making an investment.
Liquidity is an important factor, especially for seniors who require funds to address medical emergencies or other unforeseen expenditures. Choosing a cumulative FD that compounds interest and matures at the end of the tenure can be ideal to ensure both returns and liquidity.
At the same time, it’s crucial to review and reassess the investment strategy periodically. Notably, economic conditions and interest rate scenarios are likely to change, influencing the performance of FD. As a habit, regularly monitoring the investment portfolio and making adjustments can aid senior citizens in optimising returns and securing their financial well-being after retirement.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.