Age is merely a number; however, it holds significant importance when it comes to financial planning. Having a roadmap to manage finances in the twilight years with fixed deposits (FDs), systematic investment plans (SIPs), and mutual funds always pays off in the long term. To get good returns by investing in these, retirees need some expert advice to design an investment portfolio for reaping the right returns at a ripe age.
With the rise of the silver tsunami and assisted living with geriatric care, it's high time for senior citizens to judiciously sort out bank balances with an eagle eye while playing the last innings on life's pitch.
Invest When in the Eventide of Life
Investment by the elderly population can come in handy on many counts. By pumping in their resources, senior citizens can combat inflation, supplement retirement income, capitalize on their experience, leave a lasting legacy and adapt to technological advancements. “It is important to seek financial opinion at an old age, conduct thorough research and develop a diversified investment strategy that aligns with the investor’s goals and risk tolerance. By actively participating in the investment arena, the aged minds can secure their financial future and enjoy the fruits of their labour at the dusk of their lives,” notes Abhinav Angirish, Founder, Investonline.in, one of the leading mutual fund investment platforms in India.
It is never too late to start and learn anything in life with deep determination and sky-high confidence. Why not invest then? “The major reason why people in silver years should steadily invest is for the continuous churning of funds,” insists Ankush Bali, the financial advisor at Aditya Birla Sunlife Insurance. “Today, the FD rate (currently, many banks are providing great returns of up to 7-7.75 per cent on FDs) might be on the higher side but tomorrow it may fall. Therefore, the investment pie chart should be a diversified mix of mutual funds and pension schemes with an immediate annuity as well. This would keep the boat of matured investors afloat for a longer period, preventing their funds from drying up easily. It also reduces the risk of keeping money in one segment or hoarding the same in a single bank,” he further explains.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, envisions that “most senior citizens bank on income from savings and FDs for their post-retirement life. Fixed income returns barely beat inflation in the long run. Therefore, it is essential to invest in inflation-beating asset classes for a seamless customer journey.”
To maintain a hassle-free lifestyle, senior citizens should walk the investment route. It breeds opportunities like wealth storage and dilution of the impact of inflation. “By investing, aged people can generate additional income through dividends, interest or capital gains. This also provides a means to leave a monetary legacy for their loved ones. However, it is important for seniors to assess their risk tolerance, extend their portfolio and resort to professional counsel to ensure that their investments match their ambitions and circumstances,” remarks Manu Awasty, Founder and CEO, Centricity WealthTech.
Senior citizens should invest for several reasons. “Since they don’t have a regular source of income, returns from their investments will help them meet their daily expenses. Moreover, it allows seniors to maintain their purchasing power over time. Additionally, investing can be an outlet for them to endorse charitable causes. Plus, engaging in investment activities can be a great morale booster, keeping aged people mentally and emotionally busy and motivated,” avers chartered accountant and financial content creator Twinkle Jain.
Schemes to Snap Up
Albeit a slew of lucrative schemes tends to woo the grey populace to park their money in and benefit from the same, market analysts caution against a careless stance while grabbing a seemingly attractive financial instrument on offer. “As we gradually grow greedy for the returns, we force ourselves to lose our monetary assets,” warns Bali. One should first weigh the pros and cons under the eagle eye of an expert reckoning his preset goals and take the risk-free investment path that promises stable and assured returns, he views. “In India, a few such good schemes cater specifically to the needs and preferences of senior citizens, unveiling exciting features, such as regular income, tax benefits and capital preservation. Some of the popular investment options are Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana (PMVVY), fixed deposit, mutual funds, et al,” shares Angirish.
Vijayakumar renders that senior citizens can lap up a portfolio combo of debt funds and EPF (Employees' Provident Fund), among others.
Some worthwhile schemes include real estate investment trusts (REITs), which offer steady income and potential capital appreciation, dividend-paying stocks, which provide regular income through dividends, and bonds which deliver fixed returns over a specified period. Additionally, seniors can explore mutual funds or exchange-traded funds (ETFs) that provide diversification and professional management. Also, some senior citizens may choose to invest in rental properties for regular income.
Health is Wealth
When you are above 60, geriatric issues crop up every now and then. People also go for assisted living. As a result, medical bills keep mounting. One wonders if there is any solution to provide relief in the absence of a Mediclaim to the economically weaker masses. “Aged patients in abject poverty are taken care of under the Ayushman Bharat Scheme, which lends a coverage of Rs 5 lakhs per family. For the non-poor category without medical insurance, former employers' insurance is the only option. In case of senior citizens with well-placed children working in the corporate sector, there are health insurance provisions that cover parents too,” informs Vijayakumar.
Among the government schemes available for senior citizens, the Social Security program provides retirement benefits based on an individual's work history. Additionally, there are state-specific programs like the Senior Citizens' Welfare Fund, which offers financial aid for older adults. It is advisable to discuss with the local government authorities or financial experts for precise details regarding the eligibility criteria and benefits offered by these schemes.
Lay a Bet on Stocks
Seniors can gamble on stocks with high returns. But they must follow a list of dos and don’ts before foraying into the share market, which is an unpredictable territory.
Assorting a winning basket of stocks is never a cakewalk. On one hand, investment in stocks involves inherent risks, while on the other, it offers attractive long-term returns. However, it is crucial for seniors to approach stock market investments with caution since the volatility can be quite unnerving.
It is significant to note that investing in individual stocks or other market instruments can put one in peril, especially senior citizens with a limited risk profile or lower risk tolerance. Mutual funds allow seniors to pool their money with other investors, thus spreading the risk across a diversified portfolio. By investing in a mix of assets, such as stocks, bonds or money market instruments, mutual funds aim to curb the impact of any single investment's adverse performance on the overall portfolio. This variation helps experienced seniors cope with any risk stemming while aiming for reasonable returns.
Senior citizens can invest in stocks with enormous returns but there should be a division of funds in his portfolio featuring a robust combination of high dividend-yielding stocks, growth stocks, multi-bagger stocks and blue chip stocks.
Attain the Long-Cherished Goals
With the increase in life expectancy and the decline in the mortality rate, people are pulling out all the stops to remain hale and hearty even after crossing the most productive years of their life. They make an all-out effort to enhance the overall quality of life, which is a bright spot on an otherwise pallid, monotonous canvas of retired life. Hence, silver years could also be the perfect time and opportunity to chase unfulfilled dreams. Can any investment scheme provide this requisite cash injection to serve as the wind beneath an aged bird’s flapping wings?
Prudent investors start heaping resources at a younger age and with that rolled money on their side, they can easily explore their coveted dreams. “Otherwise, one should plan for it and start putting money on some hot stocks, mutual funds and ULIPs (Unit Linked Insurance Plan),” reminds Bali.
Better be Net-Savvy Than Sorry
Although banking persons visit senior citizens' places for client servicing and simplifying their formalities, still is it better for the aged account holders to be tech-savvy to do net banking and virtual transactions? As many are not compatible with smartphones, can this put their identity and bank balance at risk?
Embracing technology allows seniors to conduct banking activities from the same comfort zones of their homes, providing greater flexibility and accessibility. It also empowers them to manage their finances independently, lowering the risk of physical visits and opening up a wider range of banking services.
Online banking provides convenience and the ability to perform various transactions from anywhere. It allows seniors to tackle their finances efficiently. On days when the bank professional is not available and the transaction needs to be done urgently, the citizen will be compelled to visit the bank. Therefore it always helps if the older generation has deep knowledge of virtual banking activities. Moreover, given the spike in financial thefts and forgery, senior citizens must grow their awareness of technology to take charge of their finances better. This would ensure a safety net around their financial assets.
Market Size
The market size of senior investors in India is significant and it continues to inflate as the population ages. The increasing awareness of retirement planning, income generation and wealth preservation among old investors makes it an important segment for financial institutions and investment advisors to focus on.
At the moment, India has more than 138 million senior citizens and this number is expected to be 200 million by 2030. The market value is already estimated to be Rs. 73,000 Cr or USD 10.15 billion, witnessing a steep CAGR of above 10 per cent during the forecast period. Furthermore, the services provided by certain communities for senior citizens are driving the market.
Bottom Line
While not all seniors in India actively participate in investment activities, there is a comprehensible growing consciousness of the need for financial planning and investments amid this group. Many senior investors are looking for ways to make their retirement a smooth sail with a sufficient inflow of money. Various Indian financial institutions and investment firms acknowledged the potential of the senior investor market and are developing products and services to meet their needs. Senior-friendly investment programmes, retirement funds and specialised consulting services are included in the service package available for the elderly section.