January 30, 2023

Each, the Senior Citizen Financial savings Scheme (SCSS) and PM Vaya Vandana Yojana are government-backed, and so, virtually risk-free.

The Small Financial savings Schemes of Senior Citizen Financial savings Scheme (SCSS) and PM Vaya Vandana Yojana (PMVVY) can be found for senior residents. And if each you and your partner are over the age of 60, then the 2 of you may park your funds in these two schemes to get pleasure from common, secure revenue at enticing charges of curiosity.

First selection for retirees with revenue wants

Each schemes are government-backed, and so, virtually risk-free. So, the assure by the federal government makes certain that you simply get the return (curiosity) on the schemes on time all through their tenures.

Each Senior Citizen Financial savings Scheme (SCSS) and PM Vaya Vandana Yojana (PMVVY) present 7.4 p.c curiosity every year as of now. And whereas SCSS has a tenure of three years (extendable by three extra), PMVVY has a tenure of 10 years. So, you get to lock in these returns if you spend money on these schemes. And these are fairly enticing returns. That’s as a result of these are sovereign-backed authorities debt devices that supply full peace of thoughts to senior residents.

So, for retirees seeking to spend money on fastened revenue choices, the primary precedence must be these government-backed investments of SCSS and PMVVY.

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There’s nevertheless, an higher restrict on how a lot you may spend money on these schemes individually. This restrict is ready at present at Rs 15 lakh every.

How can retirees aged above 60 use the SCSS + PMVVY combo?

Whereas a person can solely have one account every of SCSS and PMVVY, issues change in case you function as a pair.

For a pair, the place each people are above 60, they’ll make investments Rs 15 lakh every in SCSS and PMVVY individually. One can open accounts individually, or if opening collectively, then (let’s say) the husband would be the first holder in a single account with the spouse because the second; and the spouse would be the main holder within the different one with the husband because the secondary holder.

So, as a pair, you may make investments a complete of Rs 30 lakh as a substitute of simply Rs 15 lakh in SCSS, and equally, one other Rs 30 lakh in PMVVY.

So, how a lot revenue will they obtain from Rs 60 lakh in SCSS + PMVVY?

At 7.4 p.c annual rate of interest for each, the couple will get:

·      Rs 1.11 lakh annual curiosity from husband’s SCSS

·      Rs 1.11 lakh annual curiosity from spouse’s SCSS

·      Rs 1.11 lakh annual curiosity from husband’s PMVVY

·      Rs 1.11 lakh annual curiosity from spouse’s PMVVY

That may be a complete of Rs 4.44 lakh every year in common revenue. Translating this to a month-to-month determine, this involves about Rs 36,000-37,000 monthly.

This might not be sufficient for a lot of, however remains to be a good month-to-month revenue determine for a big part of retirees.

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However simply to be clear, the pay-out might not precisely be month-to-month on this mixture. Whereas the PMVVY permits the retiree to decide on curiosity pay-out frequency from amongst month-to-month, quarterly, half-yearly and yearly choices, SCSS provides just one choice ― quarterly pay-out. So, one must plan the money flows and necessities accordingly if utilizing each to fund common revenue wants submit retirement.

What in case you want extra revenue in retirement?

There’s a excessive risk that with rising prices, relying solely on SCSS and PMVVY might not be sufficient.

Upon getting maximised your mixed investments in SCSS and PMVVY (at Rs 60 lakh in complete), you may discover the next choices as nicely:

·      Put up Workplace Month-to-month Revenue Scheme or POMIS ― It provides a relatively decrease 6.6 p.c every year and comes with a most restrict of Rs 4.5 lakh per individual and Rs 9 lakh per couple.

·      RBI Floating Charge Bonds – This has six-monthly charge resets (and is linked to the NSC charge + 0.35 p.c). At present, this stands at 7.15 p.c with a half-yearly curiosity pay-out. The nice half is that there isn’t any higher restrict on the funding quantity, and therefore, these with a bigger corpus can think about this selection as nicely.

·      Speedy Annuities – Annuities too, can be utilized to generate and lock in fastened revenue for all times. However the extra you delay the annuity buy, the higher charges you’ll get with increased age bands.

·      Debt Funds – When you assess how a lot you want as common revenue and handle it by way of a mixture of SCSS + PMVVY and/or RBI Floating Charge Bonds and/or POMIS, the remaining required revenue could be generated by establishing automated SWP withdrawals from good debt funds.

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As a retiree, whereas your main aim is deriving common predictable revenue, you shouldn’t put all of your cash (retirement corpus) in fastened revenue devices alone.

And that’s as a result of in the end, these fastened devices will see downward revision in charges because the years cross by. So, you want cash in belongings that can assist you to beat inflation to some extent. And to attain that, fairness is the one dependable choice. Opposite to what many individuals assume, most retirees should make investments a small portion of their retirement corpus in equities even after retirement.