Senior citizens often look for the safest way to invest their funds and that’s where a Fixed Deposit (FD) helps them. An FD offers assured returns and is considered one of the best investment avenues for senior citizens. With FD investments, senior citizens can unlock mass investing interest with the rising policy rates. Experts expect another rise of 50bps in the policy rate in the December 2022 meeting of the RBI (Reserve Bank of India) and the MPC (Monetary Policy Committee), taking the repo rate to 6.4%. It will further increase senior citizen FD rates. Find out more about senior citizen FD below.
Fixed Deposits – The Safest Deposit for Senior Citizens
- Special and Higher Interest Rate: Banks offer special Fixed Deposit schemes for senior citizens with the benefit of a higher interest rate than regular or non-senior citizen FDs. Once an individual has deposited their spare funds for a fixed period, these special FDs will offer higher returns at additional rates as per the bank policies. The additional interest rate can be 0.50% more for senior citizen FD. This additional interest is even higher for super senior citizens of 80+ years. It can be 0.75% higher for super senior citizens with bank FDs.
- Financial Growth with Safety: When you retire, you can continue to earn high and assured interest until maturity, irrespective of market conditions, with a senior citizen FD. Most investment avenues are subject to market-related returns with somewhat unavoidable risk exposure. Bank Fixed Deposits provide a sense of safety to depositors as their returns are not linked to market conditions. Another aspect is insurance which ensures secure financial growth for the depositors. The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures each bank deposit for up to Rs.5 Lakh.
- Source of a Regular Income: Senior citizens continue to earn a regular interest income with an FD until it matures. And to receive the interest periodically, senior citizens can opt for a non-cumulative FD. The bank will credit interest income – monthly/quarterly/half-yearly/annually to their accounts. Such options make FD investments more attractive to senior citizens as they mostly depend on the returns on their investments.
- Tax-savings Under Section 80 C: Every investor considers the tax benefits while choosing an investment tool. Senior citizen FDs offer tax benefits where the depositor gets tax exemption of up to Rs. 50,000 in a financial year.
- Online Booking: Senior citizens need the convenience of making investments online. Banks provide the facility of online FD booking for Senior citizens. So senior citizens can ensure their FD is booked without stepping out of their homes. The FD tenure will be between 7 days to 20 years which you can choose as per your investment goal.
- Flexibility: Banks allow you to start investing as low as Rs. 10,000 on a senior citizen’s Fixed Deposits. After that, you can increase the FD amount in multiples of Rs.100 as there is no upper limit for senior citizen FDs.
- Liquidity: Another benefit of senior citizen Fixed Deposits is the Overdraft (OD) facility. This facility increases the liquidity of FDs for depositors. Banks facilitate their customers with a high overdraft (OD) facility of up to 90% of the principal value.
- Nomination Facility: Retired people can invest a lump sum amount in their names in a Fixed Deposit for a fixed tenure to earn guaranteed returns on their invested amount. It is good to add a nominee to the FD as Banks allow this facility to the depositors. It will be helpful to process an FD at maturity in case of an unfortunate demise of the borrower.
- Premature Withdrawal Without Penalty: Renowned banks allow senior citizens to withdraw FD amounts without penalty charges. This facility is not for non-senior citizen FD holders. Banks penalise their FD interest rates by 1% in case of premature withdrawal of regular FDs. A premature penalty of 1% may not affect senior citizens’ FD interest rates, depending on the bank policy.
Thus, best fixed deposit plan offer fixed returns without impacting the interest during the tenure. It makes FDs an ideal investment option for senior citizens as they can not afford to lose money in sentiment-driven market-related investments. The FD interest rate for senior citizens can go up to 8.05% with renowned banks.