How are Fixed Deposits Beneficial for Senior Citizens?

With the world around us changing so rapidly, new investment options are continually being introduced to the market. However, some stood the test of time for specific and entire generations. One such option is the Term Deposit Account. It is beneficial for senior citizens who prefer taking no risks at later stages of life.

A Fixed Deposit or FD is a financial instrument offered by banks in India. When you open one, you deposit a certain sum with the bank, which gets locked for a fixed duration. The deposited amount grows at a steady interest rate that is higher than that offered by Savings Accounts. You also come across specific Fixed Deposits for senior citizens or those over 60 years old.

How does it help them?

Higher interest rates

Most banks offer special interest rates on FDs geared towards this age group. These rates are almost always higher than regular interest rates, allowing senior citizens to take advantage of them. These interest rates may be as much as 50 basis points higher than usual, which translates to higher earnings.

Safe space for financial growth

There are plenty of investment options available today to help your money grow. Since many are market-linked, they are subject to fluctuations and risk. As a senior citizen, having an investment option that is protected from fluctuations and guarantees returns can be highly worthwhile. FDs are ideal for low-risk investors and others new to the investment world.

Provides regular income

Even with the most well-planned savings, post-retirement life often requires regular supplementary income. With Fixed Deposits, you can receive such income through regular interest payouts. You also have the option to select the frequency of this payout, which can range from monthly to quarterly, semi-annually, or annually. 

Tax exemptions

Another useful benefit of opening an FD for senior citizens is their tax treatment, which differs significantly from regular taxation. Regular Fixed Deposits can provide tax exemption to the average investor on interest earned of up to Rs. 40,000. Senior citizens can now claim tax exemptions on FD rates for up to Rs. 50,000.

Loan Against FD

FDs for senior citizens can offer benefits beyond interest payouts, including high returns and tax-saving advantages. Suppose a need ever arises for you to raise financial assistance. In that case, you can even claim a Loan against your current FDs to access a more liquid and immediate financial option.

Conclusion

The first step is to find an FD that provides the benefits you need and aligns with your goals. As a senior citizen, you get a comprehensive idea of the various advantages offered. You can research and compare the charges and interest rates of several banks on your phone or PC.