Here are two good investments for those over 60 and seeking regular income

Both, the Senior Citizen Savings Scheme (SCSS) and PM Vaya Vandana Yojana are government-backed, and so, practically risk-free.

The Small Savings Schemes of Senior Citizen Savings Scheme (SCSS) and PM Vaya Vandana Yojana (PMVVY) are available for senior citizens. And if both you and your spouse are over the age of 60, then the two of you can park your funds in these two schemes to enjoy regular, stable income at attractive rates of interest.

Both schemes are government-backed, and so, practically risk-free. So, the guarantee by the government makes sure that you get the return (interest) on the schemes on time throughout their tenures.

Both Senior Citizen Savings Scheme (SCSS) and PM Vaya Vandana Yojana (PMVVY) provide 7.4 percent interest per annum as of now. And while SCSS has a tenure of three years (extendable by three more), PMVVY has a tenure of 10 years. So, you get to lock in these returns when you invest in these schemes. And these are pretty attractive returns. That’s because these are sovereign-backed government debt instruments that offer complete peace of mind to senior citizens.

So, for retirees looking to invest in fixed income options, the first priority should be these government-backed investments of SCSS and PMVVY.

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There is however, an upper limit on how much you can invest in these schemes individually. This limit is set currently at Rs 15 lakh each.

While an individual can only have one account each of SCSS and PMVVY, things change if you operate as a couple.

For a couple, where both individuals are above 60, they can invest Rs 15 lakh each in SCSS and PMVVY individually. One can open accounts individually, or if opening jointly, then (let’s say) the husband will be the first holder in one account with the wife as the second; and the wife will be the primary holder in the other one with the husband as the secondary holder.

So, as a couple, you can invest a total of Rs 30 lakh instead of just Rs 15 lakh in SCSS, and similarly, another Rs 30 lakh in PMVVY.

So, how much income will they receive from Rs 60 lakh in SCSS + PMVVY?

At 7.4 percent annual interest rate for both, the couple gets:

·      Rs 1.11 lakh annual interest from husband’s SCSS

·      Rs 1.11 lakh annual interest from wife’s SCSS

·      Rs 1.11 lakh annual interest from husband’s PMVVY

·      Rs 1.11 lakh annual interest from wife’s PMVVY

That is a total of Rs 4.44 lakh per annum in regular income. Translating this to a monthly figure, this comes to about Rs 36,000-37,000 per month.

This may not be enough for many, but is still a decent monthly income figure for a large section of retirees.

But just to be clear, the pay-out may not exactly be monthly in this combination. While the PMVVY allows the retiree to choose interest pay-out frequency from among monthly, quarterly, half-yearly and yearly options, SCSS offers only one option ― quarterly pay-out. So, one needs to plan the cash flows and requirements accordingly if using both to fund regular income needs post retirement.

There is a high possibility that with rising costs, relying only on SCSS and PMVVY may not be enough.

Once you have maximised your combined investments in SCSS and PMVVY (at Rs 60 lakh in total), you can explore the following options as well:

·      Post Office Monthly Income Scheme or POMIS ― It offers a comparatively lower 6.6 percent per annum and comes with a maximum limit of Rs 4.5 lakh per person and Rs 9 lakh per couple.

·      RBI Floating Rate Bonds – This has six-monthly rate resets (and is linked to the NSC rate + 0.35 percent). Currently, this stands at 7.15 percent with a half-yearly interest pay-out. The good part is that there is no upper limit on the investment amount, and hence, those with a larger corpus can consider this option as well.

·      Immediate Annuities – Annuities too, can be used to generate and lock in fixed income for life. But the more you delay the annuity purchase, the better rates you will get with higher age bands.

·      Debt Funds – Once you assess how much you need as regular income and manage it via a combination of SCSS + PMVVY and/or RBI Floating Rate Bonds and/or POMIS, the remaining required income can be generated by setting up automatic SWP withdrawals from good debt funds.

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As a retiree, while your primary goal is deriving regular predictable income, you should not put all your money (retirement corpus) in fixed income instruments alone.

And that is because sooner or later, these fixed instruments will see downward revision in rates as the years pass by. So, you need money in assets that will help you beat inflation to some extent. And to achieve that, equity is the only reliable option. Contrary to what many people think, most retirees must invest a small portion of their retirement corpus in equities even after retirement.