Fixed deposits are very popular among retirees and FDs feature in almost every senior citizens investment portfolio. It offers a high degree of safety to funds and additional returns ( banks provide senior citizens with 0.25 % to 0.50 % extra interest rates). It also provides a good degree of liquidity as Fds can be broken at fairly low penalty rates and it provides regular interest income.
At present, fixed deposits offer interest rates which are anywhere from 9 % to 10.75 % for deposits having various maturity periods.
Post Office Monthly Income Scheme (POMIS)
Post Office Monthly Income Scheme is also popular among retirees for they provide regular income and have very low risk associated with them. They are operated from post offices and investment in them can be made from Rs. 1, 500 onwards and in multiples thereafter till Rs. 4, 50, 000 for single accounts and Rs. 9, 00, 000 for joint accounts.
Funds need to be invested for a period of 5 years on which monthly interest is paid at 8.5 % annually. Though, this avenue of investment has comparatively high penalty rates being charged at 2% if the funds are withdrawn before the completion of three years and 1% if the funds are withdrawn after 3 years.
Post Office Time Deposits (POTD)
Post Office Time Deposit is a small saving scheme designed to provide safety and liquidity to investors. In this, the minimum amount which has to be invested is Rs. 200 and in multiples of Rs. 200 with no upper limit of deposit. They provide interests ranging from 8.2 % to 8.5% depending on the time period for which the investment is made. Under this scheme, though the interest is compounded quarterly, it is payable just once a year.
Investments can be made for tenures ranging from 1 year to 5 years. Premature withdrawal of funds is allowed subject to a penalty of 2 percent.