Fixed deposits have always topped the investment portfolio of a risk-averse person but money being blocked until maturity has been one of the major drawbacks of FDs. However the evolvement of new-age FDs [link to earlier article] have eliminated the liquidity constraint and made FDs one of the best options for an investor. Fixed deposits with a monthly income have diversified the investment portfolio of a retiree.
Also high FD rates in recent times have made these instruments more attractive. Today almost all fixed deposits offered by banks and financial institution give an additional 50 to 100 basis points interest rate over the card rates to the senior citizens. Presently most banks are paying a return that ranges between 9.50% and 11% for a period of 1 to 2 years. The interest rate that can be withdrawn every month on a monthly income plan can be calculated via the fixed deposit interest income calculator on rupeetimes.com.
These fixed deposits are rated as an ‘AAA' investment which means that the degree of safety associated to them is high and this ensures capital preservation which is given highest priority by the retiree.
Moreover the fixed deposit plans are more liquid as compared to the other investment options such as SCSS and POMIS. The latter schemes also facilitate liquidity before maturity but deduction for premature encashment entails a loss of the principal amount invested. Conversely on breaking the FD monthly income plan, the deduction is only of the interest income that can be recovered from the amount invested.