When considering investment plans for senior citizens, numerous factors must be taken into account due to the challenges associated with generating a consistent income from their accumulated savings. Given that these funds often constitute the entirety of their financial resources, seniors typically gravitate towards more conservative investment strategies.
Before making any investment decisions, it is essential to carefully calculate one’s actual financial needs. This involves estimating how much money one would need on a monthly basis to cover all your expenses.
It is also important to consider any additional sources of income you may have, such as rental income, pension payments, or contributions from family members. Additionally, you should calculate what percentage of your total investment corpus you plan to use each year to ensure that you are not depleting your funds too quickly. By carefully evaluating your financial situation and needs, you can make more informed investment choices that align with your long-term goals and objectives.
“As our parents or in-laws officially enter the golden years of their lives, financial security/stability becomes a major challenge for them. In the absence of a secondary income source, managing home and social commitments becomes troublesome. It also puts forth the need for alternative investment channels that offer financial stability. In addition to the usual age-old options like FDs, bonds, etc., alternative investment tools offer stable returns and can be a great value addition to their financial portfolios,” said Bhuvan Rustagi, Co-founder and COO, Per Annum.
Talking about alternative investment, Rustagi said P2P lending is one of the viable alternative investment options available today for individuals looking for stable returns, especially for people nearing retirement age.
Peer-to-peer (P2P) lending constitutes a major progression in the realm of alternative finance, providing online platforms that directly connect lenders with borrowers. These digital marketplaces facilitate loan acquisition without the need for traditional financial intermediaries like banks.
This innovative model confers considerable advantages, especially for borrowers who encounter difficulties in securing loans through conventional channels—such as individuals with subpar credit scores or limited credit histories. By leveraging P2P lending platforms, these borrowers gain access to necessary funding from individual lenders willing to accept associated risks in anticipation of higher returns.
“As our parents or in-laws enter the 60s club, the financial landscape can be rocky. In such a scenario, alternative investment options bring the benefit of providing a stable, secure future for them and their families to the table. Alternative investment instruments are a great way to diversify investment portfolios with options like P2P lending, NCDs, government schemes, REITs, etc. This way, senior citizens can seamlessly manage their finances and build resiliency for the future. One of the effective ways to diversify their investment portfolio, alternative investments also bear inflation-hedging capabilities against market volatility and reduce overall risk,” Rustagi added.
P2P lending in India is governed by the Reserve Bank of India (RBI). Within this framework, investors earn interest on the amounts they lend. Similar to the interest earned from other financial instruments such as Fixed Deposits (FDs), the income generated through P2P lending is liable for taxation.
“P2P lending is an RBI-regulated asset class that helps investors generate stable returns. The P2P lending platforms offer senior citizens an opportunity to diversify their investment portfolio and potentially earn high returns. The process revolves around lending funds to the top 2% of the creditworthy borrowers and earning up to 11-12% per annum returns. It thus is a flexible investment avenue, providing a choice between monthly interest payouts for immediate cash flow or compounding interest to maximise long-term growth,” Rustagi said.
Beside these there several fixed-term investment plans available for investors, ranging from 1 month to 5 years lock-up. Fixed-income investment options offer returns at a fixed rate over a predetermined period. It is important for investors to understand that the primary objective of these debt instruments is not to maximize returns but rather to preserve capital while providing guaranteed gains.
“There are several fixed-term investment plans available for investors, ranging from 1 month to 5 years lock-up. The stable income returns range from 11% per annum to net annual returns (compounding) of 14.58%, providing flexibility for investors to choose the duration that caters to their financial goals. This way, the P2P lending platforms offer a reliable and stable option for wealth generation,” Rustagi said.