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Provide Security to Senior Citizen Parents With These Investments, This Parents' Day Parents in the senior citizen age group should not shy away from investing, thinking of age

By Shiv Parekh

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For senior citizens, securing a steady post-retirement income and ensuring a life of financial stability are top priorities. With inflation, rising medical care costs, increasing longevity, senior citizens require a regular retirement income to meet all their needs comfortably. Today, a standard monthly pension may no longer be sufficient to beat the rising inflation.

Many may seek to invest in order to secure steady returns that would provide financial security and income stability to their senior citizen parents. From the time-tested options such as fixed deposits and schemes tailored for seniors to new, steady avenues like fractional ownership in commercial real estate, today several options exist that can achieve these goals.

This Parents' Day, one can ensure steady returns on relatively low-risk investments for senior-citizen parents through:

Fixed deposits

Fixed deposits are considered as one of the safest tools for senior citizens and rates for senior citizens are higher than regular rates. Under Section 80 TTB of the Income-tax Act, an interest income up to INR 50,000 for senior citizens during a financial year is completely tax-free.

Moreover, one can also consider investing in the Post Office Monthly Income Scheme (POMIS), which offers a regular monthly income. The deposits have a flexible duration ranging from 12 months to 60 months depending on one's needs. The other thing to keep in mind is that interest rates are revised annually.

Debt funds/bonds

Debt funds are considered safer, as these focus on fixed-income investments. Long-term debt funds can offer higher value, depending on the performance of the market. The risk appetite generally decreases post retirement, and the safety of capital becomes the most important aspect. Hence, debt mutual funds or hybrid mutual funds with little or no equity exposure would be a safer choice for senior citizens.

Sovereign bonds are another option that are issued by the government to raise money for specific projects. Unlike corporate bonds, there is no risk of non-payment in sovereign bonds as these bonds are guaranteed by the government itself.

Moreover, the returns are tax-free. The tenure for the bonds can vary from 10 years to 30 years depending on the length and scope of the project.

Senior citizen saving scheme

Many consider the best senior citizen investment schemes to be those that are regarded as safe because they are backed by a sovereign guarantee, i.e., backed by the government of India. One such investment is the Senior Citizen Saving Scheme (SCSS), a product offered by the government of India since August 2004.

SCSS is a central government-backed savings scheme. It is a full debt instrument with low risks and offers an attractive interest rate of 7.4 per cent.

Another plan offering a similar interest rate of 7.4 per cent is the Pradhan Mantri Vaya Vandana Yojana (PMVVY), which is another low-risk investment pension plan. Operated by the Life Insurance Corporation (LIC), the scheme has a tenure of 10 years.

Residential property and real estate

The simplest and most traditional way is to invest in residential properties and put it up on rent. The process is simple, but needs a large investment and yearly maintenance costs. Even if one does not want to be burdened with a huge investment cost outright, he/she can start small, as renting out a room to commercial or residential tenants.

Real estate satisfies both criteria that most senior citizens seek - stability and regular returns. Moreover, commercial real estate (CRE) offers higher returns than residential properties. Today, opportunities exist that allow people to invest in CRE and avail the benefits that it offers. This is where fractional ownership of commercial real estate offers steady returns which can appreciate over time.

In commercial real estate, fractional ownership of property refers to a group of investors pooling their funds to jointly purchase real estate so they can reduce the cost burden and risk exposure and share the rental income. A popular investment option in the US and Europe, fractional property investment is nascent in India. Industry experts estimate strong growth in the coming years, and India's volume of Grade-A office spaces will reach 1 billion square feet by 2025. A considerable portion of this investment would focus on fractional ownership.

Fractional ownership of commercial real estate offers significantly higher returns than residential properties. The annual rental yield of a commercial property, at around 8-10 per cent per annum, is around three times higher than the yield from a residential property.

Towards financial security for older parents

Parents in the senior citizen age group should not shy away from investing, thinking of age. Age should not be a factor, but investment goals, moderate risks and steady returns should be key criteria for investment at an elderly age.

Shiv Parekh

Founder, hBits

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