Health insurance plans
Before planning to invest, look for a senior citizen health insurance policy. Medical expenses tend to increase as you get older. It is crucial to cover yourself adequately for any medical emergencies. Senior citizen insurance plans usually have ’Co-pay’ clause and sub-limits. Co pay clause means where the insurer has to bear some part of the initial expenses. Insurer chips in only after a certain level of medical bill has been reached. You must understand the co-payment and sub limits thoroughly before buying a policy.
Once you are adequately insured, you can look at different investment options. You can select more than one investment vehicle to drive you through your retirement journey.
1) Senior citizen Savings Scheme (SCSS)
At present, SCSS pays an interest at the rate 7.4 % per annum. An individual of age 60 years or more can invest in SCSS. An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under VRS can also open account. SCSS allows only one deposit not exceeding ₹15 lakh. The depositors may operate more than one account in individual capacity or jointly with spouse. Maturity period is 5 years. After maturity, the account can be extended for further three years within one year of the maturity by giving application in prescribed format. In such cases, account can be closed at any time after expiry of one year of extension without any deduction. In case of SCSS accounts, quarterly interest shall be payable on 1st working day of April, July, October and January.
2) Bank fixed deposits (FDs)
One of the most popular investment tool with senior citizens is bank fixed deposit. Usually the banks offer higher interest rates for the senior citizens as compared to the others. For an instance, special senior citizen FD offers an interest rates higher by 80 bps. A 5 year special SBI FD ’We care’ will offer an interest rate of 6.20%.
3) Post Office National Savings Monthly Income Account (POMIS)
POMIS is a five-year investment with a maximum cap of ₹4.5 lakh under single ownership and ₹9 lakh under joint ownership. POMIS offers an interest rate of 6.6% payable monthly. Accounts opened under Post Office Monthly Income Scheme has a tenure of five years.
4) Annuity plans
Most insurers provide annuity plans. An annuity is a plan that helps you to get a regular payment for life after making a lump sum investment. Different insurers offer different annuity rates. Compare the annuity rates before choosing a plan. Also, an insurer provides different annuity options where the holder may direct insurance company to pay the annuity to his/her spouse after death of the primary holder. Annuity rates for all the options will vary.
5) Mutual funds
An individual can also invest in a debt of a hybrid mutual funds based on one’s risk appetite. Then for regular income, set up an SWP or systematic withdrawal plan which pays out a specific sum at regular intervals to the investor. If you have risk appetite and ample liquidity, you can also invest a portion in equity funds which will help beat inflation in the long run. Post retirement period need not be a short period. You must prepare for what if you outlive your expected life expectancy.