If your aim is to generate monthly income, you can consider the following investment options:
SCSS
While not a monthly income investment plan, SCSS or the Senior Citizen Savings Scheme is a good quarterly income option for seniors. SCSS is a government-backed small savings scheme designed for investors above the age of 60 years. Senior citizens and retirees can invest in the scheme to secure a regular and stable flow of income to maintain financial independence in the post-retirement years. This safe monthly income plan currently offers interest at 8.2% p.a. (FY 2024-25) to help you live your post-retirement life peacefully. Additionally, you can deposit a maximum of Rs. 30 Lakhs per year and open a joint SCSS account with your spouse.
POMIS
POMIS, or the Post Office Monthly Income Scheme, is hailed as one of the best monthly income plans in India. As the name suggests, POMIS is available through all Indian post office branches. Backed by the Indian government, POMIS offers a safe investment avenue for risk-averse investors to earn regular monthly income. For 2024, POMIS is offering an attractive interest rate of 7.40% p.a., which is paid monthly. Investors can contribute up to Rs. 9 lakhs in individual accounts and up to Rs. 15 lakhs in joint accounts. The minimum investment amount is capped at a nominal value of Rs. 1,000.
Non-cumulative fixed deposits
If you have access to a lump-sum amount and are seeking monthly income, non-cumulative FDs may be one of the best monthly income investment options for you. While bank FDs are popular, you can also consider company FDs because these deposits offer better returns. Corporate FDs offered by NBFCs and housing finance companies offer attractive interest rates ranging up to 9% p.a. However, before investing in a corporate FD, you must consider the credit rating of the organisation since corporate FDs do not enjoy the usual DICGC cover of bank FDs. You can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 7.75% p.a.
Government bonds
Government bonds are prudent monthly income plans you can consider if you are a risk-averse investor. Bonds have a fixed maturity date when the principal is due. Until then, you keep receiving interest payouts. While not completely risk-free, these bonds come with sovereign backing, which means the chances of default are extremely low. They have maturities ranging from 5 to 30 years and pay monthly interest at coupon rates set by the government. However, before investing in the bond, ensure that you understand how and when interest is slated to be distributed since the Indian government also issues zero-coupon bonds that do not pay any interest.
Monthly income plans (MIPs)
When talking about the best monthly income investments, we cannot overlook the value of MIPs. MIPs are a type of mutual fund that primarily invests in fixed-income debt securities, with a small portion dedicated to equity investments to produce regular cash flows and preserve the invested capital. MIPs pay consistent income to investors on a regular basis, making them a prudent source of regular earrings. However, returns from the investment and the income payout amount are not set since they depend on the fund’s performance. Therefore, you must consider the possibility of negative returns before investing in MIPs.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The PMVVY scheme is a senior citizen-focused monthly investment plan designed to offer retirees a secured financial future. As a government-sanctioned scheme, PMVVY offers complete capital protection and steady interest earnings at 7.4% interest payable monthly. The scheme has a tenure of 10 years, and the maximum investment amount is capped at Rs. 15 lakhs. PMVVY is considered one of the best monthly income plans for seniors due to the flexibility it brings to the table. Seniors can choose from monthly, quarterly, bi-annual, or annual payout options to customise the plan as per their financial needs.
Guaranteed income insurance policy
A guaranteed income insurance plan is a unique insurance product that offers you life cover as well as guaranteed income payouts once the premium payment term is over. Hailed as one of the best monthly income plans, these insurance policies combine the benefit of a life cover with guaranteed periodic payments perks of a savings plan. The income rate and subclauses can vary depending on the selected insurance carrier and plan.
Systematic withdrawal plans (SWP)
Just like SIPs allow you to make regular and fixed investments in mutual funds, SWPs or Systematic Withdrawal Plans offer a systematic redemption strategy. An SWP is a mutual fund strategy that allows you to redeem a certain number of MF units at periodic intervals to meet your cash flow and income requirements. In simple words, you can leverage SWP to redeem a fixed amount from your MF investments at a frequency of your choosing. Additionally, SWPs offer the flexibility of withdrawing just the capital appreciation rather than the principal invested.
Dividend investments
If you’re looking for monthly income plans, you can devise one with dividend-paying investments. Investing in dividend-paying stocks and MFs can help you earn consistent returns. However, you must also cognise the risks associated with this approach. Additionally, investing in dividend-paying stocks and funds does not guarantee monthly income. Companies reserve the right to withhold dividends if the business underperforms, resulting in zero profits, or if the company decides to reinvest the amount for business growth.
Annuity plans
Insurance companies offer annuity plans to help investors generate a consistent monthly income for their retirement years. Investors can invest a lump-sum amount to earn monthly income post-retirement. Additionally, investors can choose from deferred annuity and immediate annuity options. Deferred annuity plans allow you to invest today and earn monthly income from a later date. In contrast, an immediate annuity involves receiving income as soon as you make the lump-sum investment. However, you should note that annuity payouts are completely taxable as per your applicable income tax slab.
