Table of Contents
- Let's understand what a fixed deposit is
- Fixed deposit: The best investment choice for senior citizens
- What type of fixed deposit is suitable for you?
- Additional facilities available
- The benefit of laddering
- Tax implications of FDs for senior citizens
- Conclusion
As you grow older, your risk-taking ability gets reduced. Moreover, as you approach retirement, you lose a significant source of income. So, it becomes crucial to develop an income source that supports you and your family in the long run. As a senior citizen, you must plan your finances to sustain your standard of living. Investing in a fixed deposit takes care of all your money management issues - you know your returns beforehand, enabling you to make a concrete financial plan.
Let's understand what a fixed deposit is
A fixed deposit is a savings facility offered by banks and non-banking financial companies (NBFCs). An FD is by far the best way of earning a high-interest income safely. A fixed deposit interest rate is higher than usual savings account interest rates and is assured by the issuer.
NBFCs like Shriram Finance offer additional fixed deposit interest rates for senior citizens. Shriram Finance provides an additional interest income of 0.50%* p.a. for all senior citizens, i.e. aged 60 years and above.
Fixed deposit: The best investment choice for senior citizens
A fixed deposit for senior citizens comes with a lot of benefits. Shriram Finance understands the importance of a fixed deposit facility for a senior citizen, and hence, provides seamless onboarding and regular customer support. There are no hidden charges, and every detail is provided to customers upfront. You can do everything online - from account opening to carrying out all necessary transactions so that you don't take unnecessary burdens when it's time to enjoy life.
The minimum investment amount in an FD depends on the corporation or bank. Shriram Finance fixed deposit has a minimum investment amount of Rs. 5,000, so you can open a fixed deposit account easily whenever needed. What’s more, the tenure of the fixed deposit can range anywhere between 12 months and 60 months. The flexibility in duration allows you to plan your finances to meet both short-term and long-term goals.
What type of fixed deposit is suitable for you?
There are two types of fixed deposit facilities - non-cumulative and cumulative. Both these schemes will help you achieve a predetermined purpose. If you need cash for regular, recurring expenses, like monthly expenses, to run your household, then a non-cumulative fixed deposit would be the apt investment choice for you. In a non-cumulative fixed deposit, the interest payouts happen consistently, either monthly, quarterly, semi-annually, or yearly, depending on your selected period.
However, suppose you can manage repeat expenses without being dependent on interest income and are looking for a fixed deposit investment to meet long-term goals. In that case, you should go ahead with a cumulative fixed deposit scheme to help you earn compound interest. Compound interest, a.k.a. interest on interest, lets you make more money during the same tenure. And remember, the longer the investment tenure, the higher the interest rate offered by banks and NBFCs is. Your long-term needs like saving up for your child's marriage, meeting your child's education expenses or planning an extended vacation for yourself - you can take care of all these needs with a well-thought out fixed deposit investment.
Additional facilities available
1. For senior citizens, a nomination facility is available, wherein, in the case of their unfortunate death, their nominee can claim the entire amount along with the accumulated interest. Hence, you can be assured of your family's safety and well-being.
2. You can avail of a loan against your fixed deposit if cash needs are urgent and unavoidable. At Shriram Finance, you can get 75% of the value as an instant loan provided that you have a live fixed deposit account that is at least three months old. A loan against FD is an excellent alternative to having to withdraw funds prematurely by breaking the deposit - you will not have to incur premature withdrawal charges and penalties.
3. You can opt for an auto-renewal facility while signing up for a fixed deposit scheme. This way, you can part with your due date worries, and you can focus on what's truly important.
The benefit of laddering
At Shriram Finance, the minimum amount required for opening a fixed deposit account is only Rs.5,000. The low investment criteria allow an investor to have multiple fixed deposit accounts. Why does one need multiple accounts?
The benefit of laddering is that it can be tailored to suit an individual's financial requirements. To meet your near-term cash needs, you can have a fixed deposit that matures in 12 months, and you can budget the amount of money you will need after one year and invest accordingly today. Similarly, you can have another fixed deposit that matures after a couple of years to meet your long-term financial needs.
You can have a non-cumulative account for meeting recurring expenses, and for a goal-oriented savings target, you can have another cumulative account.
The possibilities are endless - Shriram Finance provides flexibility and support in creating FD structures.
Tax implications of FDs for senior citizens
As a senior citizen, you can claim an income tax deduction of up to Rs.50,000 from your total gross income (GTI). No TDS will be deducted for up to an interest income of Rs.50,000. To avoid tax deduction, you can submit form 15H with the income tax authorities.
As per the new income tax rules, a senior citizen aged 75 and above, having only pension income and interest on fixed deposits, is not required to file their income tax returns. This will prevent you from the burden of claiming a TDS refund later on.
Conclusion
Post-retirement, you must focus on being stable to sustain your current standard of living, if not improving it for the better. And the best way to grow your retirement fund is by smartly investing it in fixed deposits, preferably those offered by corporations. Utilise all the benefits available to senior citizens, make an investment plan, and enjoy high returns to live a happy life.
