FDs are one of the most preferred investment products for senior citizens as they offer regular income and low risk. Many banks and financial organisations provide higher interest rates for Fixed Deposits for senior citizens, and thus, it is a good investment option for people who are planning to retire. However, the best way is to compare FD rates to get the best rate and the FD that suits your needs. This is where an FD calculator becomes an essential tool.
To maximise the returns on FDs for a senior citizen, it is crucial to understand how to use an FD calculator to make a comparison.
Why senior citizens get higher FD interest rates
The interest rates offered on FDs for senior citizens are slightly higher than those for regular investors by 0.25% to 0.75%. This is done with the aim of helping retirees save as much as they can and, at the same time, have a constant source of income. The higher interest rate is helpful in getting more returns while not exposing the investment to risks.
For instance, while the standard FD interest rate is 7%, a senior citizen may be offered 7.5% or 7.75% by the bank. Although it may seem like a small difference, it has the impact of raising the maturity amount over time.
How an FD calculator helps in finding the best rates
An FD calculator is a tool that is available on the internet and can be used to determine the maturity amount of an FD by using the following:
- Principal amount (investment amount)
- Interest rates for Fixed Deposits for senior citizens
- Tenure (duration of FD)
- Compounding frequency (quarterly, half-yearly, yearly)
An FD calculator is beneficial as it provides the returns instantly and also helps in comparing the various banks and NBFCs.
Steps to use an FD calculator to find the best interest rates
- Investment amount – This is the amount of money that you would like to put into the business.
- Choose the tenure – Senior citizens prefer to select a longer tenure of 5 years or more for a higher rate of interest.
- Select the rate of interest – It is better to go through the various banks and their FD interest rates for senior citizens.
- Compounding period – Interest can be compounded on a quarterly, half-yearly, or annual basis.
- Click on the ‘Calculate’ button – The FFD calculator will show the maturity amount and the interest earned.
This means that by using an FD calculator, you can compare different options in order to arrive at the best FD that will give you the highest returns.
Factors to consider while selecting an FD
- Reputation of the bank/NBFC – Go for well-established financial institutions offering high security.
- Premature withdrawal policy – This is another factor that is common with most FDs, where the account holder is charged some fees for withdrawing the money before the agreed time.
- Inflation risk – Ensure that the interest rate on the FD is adjusted for inflation.
- Tax saving – If you are interested in tax exemptions under Section 80C, then you can opt for tax-saving FDs.
Final thoughts
Therefore, it is no longer a task to search for the best FD interest rates for senior citizens with the help of an FD calculator. It helps you to compare the various banks, the period of investment, and the compounding of the returns in order to get the highest returns on your investment. It is thus possible for senior citizens to plan well in order to get a regular income and, at the same time, invest without necessarily exposing themselves to risks.
