Offers
Rates
V-KYC
Debit Card Related
Credit Card Related
SA Welcome Kit 
Manage Mandate(s)
Get Mini Statement
categories
Bloggers
Blog collection
Press Release
Risk Management in Retirement: The Role of Fixed Deposits for Senior Citizens
Posted on Monday, April 29th, 2024 | By IndusInd Bank
As one reaches the age of seniority, finding stability for their hard-earned money often becomes a priority. After all, retirement should be a peaceful and relaxing time, a well-deserved break after decades of hard work. However, rising healthcare expenses, inflation, and cost of living are enough to make you worry about outliving your savings.
Fixed Deposits offer a solution to these problems. This investment instrument is low maintenance, offers stability, and generates decent returns. Learn in detail how leveraging fixed deposits helps mitigate the typical financial vulnerabilities faced in retirement.
Managing Market Volatility Risks
Your senior citizen FD is secure, with no risk of volatility, as it is not a market-linked product. The interest rate is locked in at the time of investment and remains unaffected by market fluctuations throughout the chosen tenure. This helps you get a consistent and predictable return, which is important for peace of mind and financial stability.
Battling Inflation Risk
Although FDs do not inherently protect against inflation, the higher interest rates offered to senior citizens can help offset some of its effects. These preferential rates help you preserve the purchasing power of your savings.
You can also use the FD interest rate calculator to figure out your maturity amount and choose a tenure that provides the highest possible returns.
Handling Liquidity Risks for Emergencies
For seniors, there are often moments when quick monetary help is non-negotiable, such as:
- Routine healthcare expenses that exceed the expected amount
- Spouse’s healthcare needs
- Unplanned expenses
- Home safety modifications
- Vehicle repairs
A senior citizen fixed deposit scheme saves you from resorting to high-interest loans to meet these emergency needs. Simply pledge your FD as collateral and secure a loan amounting to 90-95% of the deposit’s value.
Reducing the Tax Burden on Interest Income
The Indian government introduced Section 80TTB in the Finance Budget 2018, which allows senior citizens to claim a higher deduction limit on interest income from any bank deposits, including FDs. They can claim up to ₹50,000 deduction per annum, which is higher than the ₹40,000 limit applicable to those below 60 years.
This provision helps senior citizens retain more of their earned interest and provides them with better financial support in their retirement years. Also, if your total income is below the taxable threshold, you can submit Form 15H to prevent TDS.
Mitigating Security Risks with DICGC Insurance
Your fixed deposits are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to ₹5 lakh, which includes both principal and interest. So, if in case the bank goes bankrupt, your fixed deposits are still safe up to the DICGC insurance limit.
Tips to Maximise Value from Senior Citizen Fixed Deposit Schemes
Here are some tips to optimise your senior citizen FD investment:
| Opt for the best senior citizen FD rates | Assess your options to get the best fixed deposit interest rate so that the returns can beat inflation. |
| Use the laddering strategy | Split a large amount across multiple FDs with different maturity dates. This will help you get high liquidity, manage reinvestment risk, and capture higher interest rates over time. |
| Go for multiple payouts | Opt for interest payouts if you want a regular income stream to handle your regular expenditures. |
| Reinvest matured FDs | Reinvest the funds from matured FDs to keep earning interest, especially if you do not need urgent access to the funds. |
| Split FDs amongst banks | Divide FDs across different banks to maximise DICGC insurance coverage, with each FD insured up to ₹5 lakh. |
| Say no to premature withdrawals | Instead of breaking your deposit, take a loan against your FD. This helps you manage immediate monetary needs without disrupting your investment’s growth. |
Key Takeaways
With their safety, steady earnings, and no risk, fixed deposits are a valuable addition to any senior’s retirement strategy. To manage risks, make sure to choose the best FD rates, implement the laddering strategy, leverage tax benefits, and consider loans over premature withdrawals to preserve returns.
Want one of the best fixed deposit interest rates and additional benefits? Consider IndusInd Bank Fixed Deposits to enjoy the best-in-class interest rate of up to 7.75%. Get additional perks like a 100% paperless booking, nomination facility, five-year tax-saving FD, flexible interest payout options, and much more.
Book an FD online today!
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
