CHAPTER 2 : Monthly Income vs. Cumulative Growth
In the previous chapter, we discussed the effectiveness of Bank Fixed Deposits to preserve wealth. Lately in falling interest rate scenario, monthly income schemes for Sr. citizens have become very popular. The sovereign-backed saving schemes like Post Office Sr. Citizen Saving Scheme or Pradhan Mantri Vaya Vandan Yojana are offering around 7.40% p.a. with regular interest payout. Superior Rate of Return, Fixed monthly cash flow and Sovereign backing make these schemes the preferred choice for Sr. citizens. In a scenario where the economy is flushed with excess liquidity where banks are forced to slash interest rates on FDs, these instruments are proving to be beneficial for the Senior Citizens. The typical structure of these schemes is that initially the investor has to deposit Lumpsum amount in the scheme and then they start receiving monthly income or interest payout till maturity. In order to lock-in 7.40% p.a. interest rate, investors usually invest maximum allowed