How FD Can Help Senior Citizens In Their Financial Well-Being?
Fixed deposits are considered the safest investment option in the country. This avenue of investment provides assured returns and high returns on investment. Saving the hard-earned money is the top priority of individuals once they start earning. But that does not mean you cannot keep saving your money after retiring or reaching the age of 60 years. In this case, FD is the most secured kind of investment as well. Moreover, an FD can take care of your financial needs once you reach the age of 60. This is because it is a risk-free investment and provides the provisions of easy transactions. Moreover, the FD rate for senior citizen is higher than the usual rates.
Ways in which FD can take care of the financial well being of senior citizens
If you are a senior citizen and worried about your monthly income source, then there is no need to worry about if you are willing to or have already invested in an FD. Keep reading to know how.
Higher rates of interest
Banks offer higher interest rate against senior citizen FDs. The FD rate for senior citizen is 0.25% to 0.65% higher than the usual rates. This means, that senior citizens can earn higher returns or interest payout. This can definitely give them an edge over other kinds of investments. Moreover, this can take care of their monthly financial needs without any worries.
Regular source of income
As a senior citizen, it is best to invest in a non-cumulative FD. This is because you will receive the interest against the FD monthly, quarterly or yearly as per your needs. This can provide you with a standard income every month. Moreover, banks never delay in paying interest on time. You will receive your interest on a fixed date monthly.
The tenure of fixed deposits for senior citizens is quite flexible. This usually lies between 7 days to 10 years. As a senior citizen, you can pick the term which is the most suitable for you. Moreover, if it is a cumulative FD, you will receive a much higher amount if you choose a longer tenure.
FDs provide the provision of mentioning a nominee to senior citizen. Thus, if an unforeseen event takes place, the investment can be transferred to your loved ones.
FD comes with many tax benefits. Section 80TTA of the Income Tax Act enables senior citizens to enjoy tax exemption up to Rs. 50 thousand on the amount of interest received. Thus there will not be any tax deductions if the interest earned by the senior citizen is not more than Rs. 50 thousand. However, if the sum exceeds the aforementioned amount, then the bank is likely to levy a tax deduction on your total interest earned.
Banks provide the facility of bulk investments to senior citizens. Meaning, they can invest up to Rs. 1 crore or even more. Although the interest rates get reduced on such massive amounts, investing such a big amount in FD is still safer than any other kind of investment, because your money will still be in safe hands.
As a senior citizen, investing in an FD is the safest choice. This is because unlike mutual funds, FDs are free of market fluctuations. Meaning, the deposited amount will remain intact along with the applicable rate of interest. This will save your valuable funds from any risks and you will also receive assured returns.
Loan against FD
There might be some kind of financial emergency when taking a loan would be the only option. Well, in that case, you can opt for a loan against FD rather than going for personal loans. This is because a loan against FD comes with a very low-interest rate. The FD acts as collateral and saves the borrower from paying high interest. Thus, taking a loan against FD can be the most viable option and will not levy any extra financial burden when you are already not earning anymore.
Investing in an FD also provides the option of premature withdrawal. If you are feeling cash strapped or in need of a bulk amount, then you can withdraw the amount before the term expires. This usually comes with a negligible penalty but will suffice your needs. Although premature withdrawal is a facility provided by the bank, it is always wise to take a loan against FD rather than withdrawing it before the tenure ends, as this will reduce the interest rate greatly. Moreover, premature FD withdrawals are only allowed after the lock-in period is over.
Given the regular interest payouts of senior citizens can invest in an FD if they have a family to look after or for paying the education of grandchildren.