Where and How should Senior Citizens Invest

Finding suitable investment options can be an uphill task for anyone, especially if you are a senior citizen. While the sunset years are another wonderful phase of life, it is crucial to recognize that financial planning around this time cannot be based on the same formula you were following earlier in life. As a result, choosing the investment options carefully becomes even more important. If you are unsure how and where to invest as a senior citizen, read on to know more:

What is the investment strategy that senior citizens should follow?

A senior citizen is a person who is above the age of 60 years.

Proper allocation of funds is one of the key concerns that should feature in the investment strategy for anyone above 60. Instead of going for long-term options, senior citizens are better off sticking to short and medium-term options. What is equally important is to steer clear of speculative options simply to test their luck. It is advisable to follow a conservative approach. This means that senior citizens should consider debt investment over equity.

Assessing the risk factor is extremely important when senior citizens consider their investment options. While no investment is entirely risk-free, it is better to opt for safer with slightly lesser returns than venturing into extremely high-risk options even though they may promise astronomical returns.

Moreover, the investment should begin a few years before you retire. Rather your investment strategy when you are still young should be oriented towards taking care of your needs once you retire. Here’s where it becomes important to consider what kind of a senior citizen you are. If you are going to receive a regular pension, then you have the liberty to add more mutual funds into your portfolio and enjoy the accumulated returns in your post-retirement life.

But if you are a self-employed individual or a salaried person who won’t receive a pension, you need to settle in on an investment plan through which you can earn a regular income once you retire.  You need to tweak your investment decisions accordingly and add the right options to your portfolio. Relying on an investment advisor is also a good idea if a senior citizen investor finds it overwhelming to manage multiple investments.

Lastly, senior citizens need to be aware of the tax efficiency of their investments. As a retired investor, the focus should be on investing in assets that provide maximum tax benefits instead of those where the income is fully taxable at the hand of the investor.

What are the best investment options for senior citizens?

Let us look at some of the best investment options for senior citizens available at present:

Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme

This scheme is operated by the Life Insurance Corporation (LIC). It is regarded as a low-risk investment option, best suited for senior citizen investors who don’t have a huge risk appetite and can make a lump sum investment. LIC offers a 7.4% interest rate, and the term of the scheme is ten years. The minimum investment amount is INR 1.56 lakh, and the maximum amount is INR 15 lakh. The scheme is in operation till March 2023.

Depending on the amount invested, you can expect a pension between INR 1000 to INR 10,000 every month. You cannot avail of any tax deductions under Section 80C though the income is exempt from GST.

Senior Citizen Savings Scheme (SCSS)

SCSS is the perfect choice for a senior citizen who wants a long-term saving scheme that provides sufficient returns. The rate of interest is higher compared to what regular fixed deposits and savings account provides. You can also get tax benefits up to INR 1.5 lakhs under Section 80C. You can invest up to a maximum of INR 15 lakhs.

The maturity period is five years, and it is extendable by three years. Adding a nominee is a must opening the SCSS account. You can open the account in any scheduled commercial bank in India or at the Post Office.

National Pension Scheme

This is a voluntary retirement savings scheme that is open to anyone between the age of 18 to 65 years. Senior citizens have the option to extend their tenure up to 70 years. Investments in NPS are directed towards corporate bonds, government bonds, equity, and alternative assets.

Till the subscriber turns 60 years, it is mandatory to invest in NPS. Premature withdrawals are permitted for limited reasons. After 60, they can withdraw 60 percent of the accumulated corpus as a tax-free amount, but 40 percent should be used for purchasing an annuity plan. Corpus less than INR 2 lakh can be withdrawn on a lumpsum basis. Those who open an NPS account after 65 years of age can exit the scheme after three years from opening it.  They should use 40% of the corpus to buy an annuity plan, and 60% can be withdrawn as a lump sum. If there is less than INR 5 lakh in the corpus, you can withdraw the entire amount on a lump sum basis.

You can also exit the account before three years if you use at least 80% of the corpus to purchase an annuity and take out the rest on a  lump sum basis. But if the corpus is less than INR 2.5 lakhs, the entire amount can be withdrawn on a lump sum basis.

Anyone who opts for National Pension Scheme receives a unique Permanent Retirement Account Number (PRAN). There are two types of PRAN accounts:

Tier- I account: This is the primary account. It is mandatory for anyone who opts for National Pension Scheme.

In the case of government employees, 10% of the monthly salary gets deposited towards NPS Tier I account, and the Central Government contributes 14% of the monthly salary plus dearness allowance.  Other subscribers can make a minimum contribution of INR 1000 every financial year.

Tier-II account: This is a voluntary savings account. You can open it only if you have a Tier I account.

Contributions to the National Pension Scheme: Subscribers can make a minimum contribution of INR 1000 every financial year to their Tier I NPS account. The minimum contribution amount is INR 250.

Contributions made to Tier I NPS account subject to a maximum of INR 1.5 lakhs are eligible for tax deduction under Section 80C. Under Section 80CCD (IB), Subscribers can also claim a deduction of up to INR 50,000 for contributions to the Tier I NPS account.

Fixed/Recurring deposits

Although traditional, these options continue to be popular among retired investors. Income up to INR 50,000 are completely tax-free under Section 80TTB. On average, banks offer between 3 to 7 percent interest rates, and senior citizens can get 0.5 percent more. A benefit of holding FD is that you can borrow a loan from the bank up to 90% of the FD amount. So it is a safe option for senior citizens who may be suddenly in need of a large sum of money.

Mutual funds

Opting for a mix of short-term debt and equity mutual funds is another option senior citizens can consider.

Equity Linked Savings Scheme or ELSS is an equity tax-saving mutual fund where you can enjoy tax deductions up to INR 1.5 lakh under Section 80C annually. ELSS is also beneficial as it provides you inflation-beating returns. ELSS has a lock-in period of three years, and you cannot make a premature exit.  The minimum investment amount varies depending on which fund house you choose with.

Debt mutual funds are another category of mutual funds you can consider investing in. Here the underlying securities are a variety of corporate and government bonds, corporate debt securities, and money market instruments. Investment in these mutual funds offers capital appreciation and is perfect for those who want a regular income but don’t have a huge risk appetite. Debt funds are less volatile and comparatively less risky than equity funds.

Tax-Free Bonds

Infrastructure bonds issued by companies such as NHAI, IRFC, IRCON, and REC are also an option for senior citizen investors. These bonds are issued to raise money from the market. The interest is tax-free, and returns are without any TDS. These bonds offer around 6 percent interest.

The maturity is ten years, and no liquidity is provided in the interim. However, you are entitled to annual interest during this period. Usually, the minimum investment amount is INR 5,000 and multiples of INR 5,000 after that.


Securing your life post-retirement is extremely important regardless of your current earnings. The investment avenues shared above are some of the popular choices in the market. Make sure to weigh your options and pick one that suits your risk profile. If you need help selecting the right mutual fund, our experts at Moneyfront would be glad to assist. Reach out to us and start planning to enjoy a comfortable retired life.

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Yonita is the pillar of Client servicing at Moneyfront. She has worked with Citibank for over 25 years in operations and client servicing. In her stint with Citi, she has managed large service setups and her rich experience of banking spans across managing clients, operations, audits and compliance matters. She epitomises ‘client excellence’ in the true spirit of the word. Her motto and single-minded focus is to make sure every client is a happy client.