Investment options for senior citizens

Senior citizens don’t like to look for complicated options to get returns for their investments. After all they have worked hard to earn that money and would like to lose it. At that age all they are looking for is making their hard earned money work for them safely and leaving the balance for their loved ones.

Depending on the risks associated, here are some of the options available are

Minimal Risk (return 8.2% to 10%)
Post office monthly income scheme, National Saving Certificates, Senior citizens savings scheme, Bank fixed Deposits

Medium Risk (return 10% to 13%)

Corporate deposits, Debt Funds, Fixed Maturity plans

High risk (return 13% to 15%)

Gold funds, Monthly Income plans, Balanced funds, Equity diversified funds.
As you can see the lesser the risk, lower the return. But at that age, they can’t afford the risk
The Senior Citizens' Saving Scheme (SCSS) is a good option. A person can invest up to Rs 15 lakh in this government-sponsored ultra safe scheme. What's more, you even get tax deduction under Section 80C for the investment in this scheme. An added bonus, recently the interest rate has been linked to the government bond yield in the secondary market. The interest is paid out every quarter and is fully taxable.

Fixed deposits are even better, with interest rates going up, many banks offering seniors more than 10% interest. These high interest rates could go down in the future. It's best to invest in fixed deposits of different maturities. Instead of making one lump-sum investment in a 5- or 10-year fixed deposit, spread it over. There are also corporate fixed deposits that offer higher rates than bank Fixed Deposits, but only go for the ones with a high credit rating.

Though National Saving Certificates were loved by everyone earlier, its best to stay away from them, since five year bank deposits give you the same protection and tax saving option with better returns.

If senior citizens are looking for monthly income from their fixed deposits, one of the options is to invest the amount in 3 equal installment over a period of three months, with quarterly payments. This way they will receive income every month.

While fixed deposits offer assured returns, it's a good idea to look beyond banks for debt investments. Debt funds, especially fixed maturity plans, can give higher returns than fixed deposits. What's more, these investments are more liquid and tax-efficient than fixed deposits. The interest earned on bank deposits, Senior Citizens Savings Scheme and National Savings Certificates is fully taxable. But when you withdraw from a debt fund, only the capital gain earned per unit is taxable.

So, if you invest when the NAV is Rs 15 and withdraw when it rises 10% to Rs 16.50, only Rs 1.50 of your withdrawal will be taxed. The balance Rs 15 is the principal investment and is, therefore, not taxed. After one year of investment, the profits are treated as long-term capital gains and are taxed at a lower rate of 10%.

The best thing about funds is the flexibility they offer. An investor can customize the withdrawals to suit his needs.

But how long will the money invested last or give you returns will depend on inflation. It is the worst enemy. Stocks and gold are their best weapons against inflation.

Most senior citizens prefer investments that offer assured returns, but what to do about inflation. The best option in such cases is to opt for a mix of investments with a certain percentage in funds and gold investments.

Another option would be to invest in monthly income plans (MIPs). These funds invest a small portion (15-20%) of their corpus in equities and are, therefore, able to generate better returns than 100% debt investments.

Many senior citizens have a big chunk of their net worth locked up in the real estate they occupy. Here again, they can opt for reverse mortgage their house.