Senior citizens enjoy more benefits than the general public, particularly regarding central government schemes and bank fixed deposits.
They receive higher interest rates, typically 25 basis points to 75 basis points more than regular citizens.
While many investment options are available, senior citizens tend to prefer risk-free investments, opting for fixed deposits in banks or central government schemes.
Let’s explore some of the best options available for them. One such option is the Post Office Monthly Income Scheme (MIS), which provides monthly interest payments. Another option is the five-year fixed deposit at the State Bank of India (SBI).
For instance, if a senior citizen invests Rs. 2 lakh in SBI’s five-year fixed deposit, the bank currently offers an interest rate of 7.50% for seniors, compared to 6.50% for the general public.
This fixed deposit can also be considered a tax-saving investment, as deposits with more than five years of tenure are eligible for tax benefits.
Calculating the returns for both categories, if the general public invests Rs. 2 lahks at an interest rate of 6.50%, they will earn a total of Rs. 76084 in interest over five years, resulting in a total amount of Rs. 2.76 lahks at maturity. In contrast, senior citizens who deposit Rs. 2 lakh at 7.50% will receive Rs. 2.89 lakh at maturity.
Turning to the Post Office Monthly Income Scheme, individuals aged ten and older can open an account with a lock-in period of five years and an interest rate of 7.40%.
While there is an option for premature withdrawal, penalties apply: withdrawing before three years incurs a 2% reduction in interest, and withdrawing after three years but before five years incurs a 1% reduction.
If Rs. 2 lakh is deposited in this scheme, monthly interest will amount to approximately Rs. 1,233, totaling Rs. 74,000 in interest over five years. Thus, the total amount at maturity would be Rs. 2.74 lakh.
In summary, the returns for the general public from the MIS and SBI’s five-year fixed deposit are similar. However, senior citizens will see a higher return on their investment with the SBI fixed deposit.