Nearly 10% of India’s population consists of senior citizens. People aged 60 to 80 are known as senior citizens, while those above 80 are known as super senior citizens. Moreover, this population of senior citizens is expected to reach 19.5% of the total population by 2050, as life expectancy is increasing in India.
The senior citizen age is critical for an individual. The retirement stage is difficult as there is no fixed income like a salary, increasing medical expenses, and increasing family expenses. Managing all these circumstances would be easy if an individual earned a fixed regular income.
So, how can senior citizens earn regular income? In this article, we will explore various senior citizens’ regular income schemes.
1. Mutual Funds
If diversified well, investments have immense potential to give competitive market returns and provide a space to curb the risk. Mutual funds are one of the best investment instruments for this. It creates a pool of investor’s money to invest in various schemes launched by the fund. There are several facilities for investors to save systematically and seek to earn returns, such as:
- Systematic Investment Plans – This enables investment of small regular sums.
- Systematic Transfer Plans – This enables transfer from one fund to another over a period of time.
- Systematic Withdrawal Plans – This enables withdrawal of small regular amounts.
Systematic Withdrawal Plans (SWP)
It may be a feasible option for senior citizens to opt for SWP. If the senior citizen investor has a large lump sum amount, if kept idle, its value may be depreciated off by the time value of money. So, the individual can invest such a large amount in SWP and have regular withdrawals every month. Further, we suggest that an investor consult his financial advisor before investing to know the facility and, depending on his risk appetite, invest in the scheme.
Let’s understand SWP with this example:
Mr Mehta has a ₹10 lakh corpus invested in a balanced mutual fund. To liquidate this investment, he has opted for SWP. He sets a withdrawal amount of ₹25,000/- per month. Mutual fund investment for some of the starting months would be as follows:
| Date | Net Asset Value (NAV)(in ₹) | Units | Current Investment Amount(in ₹) |
| 1/1/2024 | 100 | 10,000 | 10,00,000 |
| 1/2/2024 | 98 | 9,744.8 | 9,55,000 |
| 1/3/2024 | 105 | 9,506.8 | 9,98,214.29 |
| 1/4/2024 | 100 | 9,256.8 | 9,25,680.27 |
| 1/5/2024 | 106 | 9,020.9 | 9,56,220.8 |
| 1/6/2024 | 102 | 8,775.8 | 8,95,136.9 |
| 1/7/2024 | 110 | 8,548.5 | 9,40,343.8 |
Learn how NRIs Can invest in mutual funds.
2. Senior Citizen Savings Scheme (SCSS)
The government of India aids senior citizens with this scheme, seeking to ensure that they are financially independent. Any senior citizen (as per age criteria) can open an account under this scheme. The scheme is an excellent investment for retired individuals who want to invest their retirement benefits in a lump sum and earn interest income every quarter.
Moreover, the interest rate since the last few quarters has been nearly 7%-9%*, which is comparatively better than that of traditional instruments. Some key features of this scheme are:
- Interest = 8.2% per annum (From April 1, 2024 to September 30, 2024)
- Interest receiving date (every year): At the last date of every quarter
- No. of deposits: only one
- Minimum deposit = ₹1,000/- and more in its multiple
- Maximum deposit = ₹30 lakh
- Tenure: 5 years. Within a year, the application should be made to extend this tenure for a further three years if investors are willing to
- Account type: Individual or Joint (with a spouse)
- Tax benefit: Section 80C of Income Tax Act, 1961
(*The rate of interest is as of July 24, 2024; please read the scheme documents before investing)
3. Monthly Income Scheme by Post Office (MIS)
This scheme is offered through the post office under the guidance of the Ministry of Finance. It seeks to enable monthly returns at a prescribed interest rate against a lump sum investment made by the investor. The scheme is one of the suitable options for senior citizens who want to invest small lump-sum amounts to earn potential interest every month.
The MIS features are as follows:
- Interest = 7.4%* per annum
- Interest received: Every month
- Account type: Individual or Joint (max three people)
- No. of deposits: only one
- Minimum deposit = ₹1,000/- and more in its multiple
- Maximum deposit = ₹9 lakh (individual), ₹15 lakh (joint)
- Tenure: 5 years
- Tax deduction: Section 80C of Income Tax Act, 1961
*(This rate is as on July 24, 2024, please read the scheme documents before investing)
4. REITs & InvITs
These innovative investment vehicles are gaining attention these days. Direct investment in sectors like real estate requires a hefty sum. However, investing in the units of Real Estate Investment Trusts(REITs) and Infrastructure Investment Trusts(InvITs) can make it easy.
These instruments are relatively new compared to traditional investment avenues in India, but they have gained traction in recent years. They offer income in the form of dividends. However, they are accompanied by market risk.
For senior citizens, who typically have a low-risk appetite, balancing these instruments with other fixed-income investments becomes crucial. Diversification is the key to managing risk and ensuring steady income.
- REITs
These trusts operate similarly to companies that issue shares and raise funds. The trusts offer units to the public, raise funds from them and invest them in real estate. Usually, these investments are in highly sophisticated residential or commercial properties.
Investment in REITs can be made through its Initial Public Offer (IPO), starting from ₹10,000/- per unit. Investment in REITs trading on the exchange does not have any minimum limit. Trusts generate rent income, which is distributed among unitholders as dividends. However, due to their market exposure, the risk is close-knit to such investments.
- InvITs
The trusts invest in finished or under-construction infrastructure projects like flyovers, parks, airports, etc. Such projects need a high amount of capital, which the pooled funds of InvITs easily provide.
Minimum investment in Public InvITs can be made in its IPO with ₹10,000/-. While trading on the exchange, there is no minimum investment constraint. Also, risk is an inherent part of it.
5. Bonds for Senior Citizens
Bonds are debt instruments offered by companies to raise capital. The government also provides bonds known as G-secs. The key feature of this instrument is that it seeks to earn fixed interest payments at regular intervals, which would suit senior citizens. Investment should be made by assessing the associated risk, returns (coupon rates), market conditions, and ratings.
6. Fixed Deposit (FD) Plans For Senior Citizens
Many banks provide special fixed deposit plans for senior citizens, which offer higher interest rates than regular FDs. For example, some banks offer senior citizen FDs at a 0.5% higher interest rate than regular rates. Also, the post office has a scheme similar to fixed deposits known as the National Savings Time Deposit Account (TD), which offers returns of 6.9% to 7.5%* for different periods, such as one year, two years, five years, etc. Further, investors should consult their tax/financial advisor before investing.
(The above figures are only for reference purposes)
*(Mentioned rates are as of July 24, 2024, please refer the scheme document before investing)
Factors to Keep in Mind While Investing
Consider aspects like these while aiming to select options for regular income for senior citizens:
- Identify your needs before investing and select the most suitable investment option. One size may not fit all.
- Investing part of your amount in diverse options would help curb the risks and aim to generate regular returns at different intervals.
- One government savings scheme, like SCSS, would help minimise the risk of your returns in times of market volatility.
- Tax liability, deductions, and tax-saving investment schemes should be considered, as they can help reduce tax payments on any investment.
Bottomline
Early investment is beneficial for all individuals. However, senior citizens should not worry, as several investment schemes can provide them with regular returns, even after retirement. The different factors mentioned above should be considered when investing. If needed, help should be sought from professionals for this planning.
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Frequently Asked Questions
How do senior citizens earn regular income?
Senior citizens earn regular income from government schemes like post office monthly income schemes, senior citizen savings schemes, fixed deposits, etc. Also, other instruments, such as mutual funds, bonds, REITs, InvITs, etc, seek to offer regular income to investors. However, it is suitable only if the senior citizen is willing to expose investment to market risk.
Which scheme is good for senior citizens?
The government offers various schemes for senior citizens to earn regular income in retirement. Certain investment instruments, such as mutual funds, bonds, fixed deposits, etc., can also be considered. Factors such as return needs, risk appetite, market conditions, etc., may be considered when choosing a suitable scheme.
What is a senior citizen savings scheme?
The Indian government offers regular income to senior citizens through a senior citizen savings scheme. Lump-sum investments can be made of a minimum ₹1,000/—and a maximum ₹30 lakhs. The interest is paid quarterly. As of July 2024, the rate is 8.2%*. The per annum interest rate has usually varied around 7% to 9% since the last few quarters.
*(The above rates are as on July 24, 2024. Please refer scheme document before investing)
How can retired people seek to earn money?
Retirement age is financially challenging to manage. However, there are various ways for retired people to make money, such as investing in senior citizen schemes, working part-time, freelancing with skills, etc. Financial independence during retirement also provides mental peace.