It’s important not only to have funds set aside for emergencies but also to invest them wisely to ensure they grow enough through time to maintain financial security when one retires or enters their golden years.
One such type of investment that offers unparalleled benefits is fixed deposits (FDs).
Fixed deposits for senior citizens are a beneficial investment not only because they are easy to manage but also provide some extra benefits such as higher interest rates and tax savings.
Unlike market-linked investments like mutual funds, where you do not know the returns over time, FDs allow people certain certainty about their return on investment with options including monthly or quarterly payments.
What are Fixed Deposits?
Fixed deposits, or FDs, are one of the safest and most popular investment options.
Fixed Deposits are essentially a type of deposit where an individual puts in money into a financial institution for fixed time period – generally up to five years. The amount can be deposited as cash or by way of linking other investments like shares and debentures with the bank account which holds the FD.
Senior Citizens have been opting for this form more than any other investment option because it offers them both higher returns and protection against inflation.
Here are some exceptional benefits that Fixed Deposits offer to senior citizens:
- Tax Relief: Seniors can avail of the tax-saving aspect offered by Fixed deposits. However, in order to get a higher return, you need to lock your money for longer time periods which is not advisable because it may take too long before one gets a compounded interest on their savings. For example, PNB Housing FD allows you to save tax after a five-year lock-in period.
- Monthly Income: Monthly income to meet your expenses is a major concern for seniors. Fixed deposits allow you to choose the amount, period, and frequency of payments which makes it easy to plan out monthly expenditure in advance.
- Periodic Interest Earnings: There are plenty of options available in Fixed Deposits like one year, two years, or any number of years as per your comfort. The interest you earn is calculated on a quarterly basis and it continues to accumulate even though the money remains locked.
- Maintaining Financial Security: Fixed deposits are known for being safe with two major benefits – the safety of capital due to low risk, liquidity because they allow one to withdraw their funds at any point in time without incurring an additional charge.
- Easy Loans: Fixed Deposit holders can avail easy loans against the fixed deposit, up to 75% of the total cumulative value of the FD which is a boon for senior citizens.
- Emergency funds: FDs are not only great for savings but also work as a great emergency fund. The funds can be retracted at a moment’s notice. However, it will lead to the loss of the accumulated interest as per the financial institution’s policy.
The main benefit that comes from investing in a Fixed Deposit is always safety at its core, but there’s much more.
Fixed deposit can be more lucrative than many other financial instruments. An FD is good for saving income for a long term such as your child’s higher education. Studies have shown that Fixed deposit with tenure from six month to three years, gives higher return than the other forms of investment schemes, and FDs are considered to be less risky too.
Investing in a fixed deposit is one of the safest investment options as it gives you lesser risk to your finances and is entirely tax free.