ELSS is an investment that is not exactly centered around senior citizens. This is the reason why there is a misconception regarding its benefits for senior citizens. Another notion related to this is that ELSS returns depend on market trends. Thus it is not suitable for senior citizens to invest in it as it involves taking a lot of risks. The truth, in fact, differs. ELSS is beneficial for senior citizens in many ways only if a judicious investment is done. Let us consider the possibility that ELSS holds for a senior citizen.
The Age Factor
The age factor usually deters senior citizens from investing in an ELSS scheme. This should not be the case. Practically thinking, ELSS is more beneficial with a short lock-in period of 3 years. This means that funds can be withdrawn within a short tenure in a case of an emergency. Also after the lock-in period, the withdrawn amount is not taxable. Another aspect of ELSS is its long-term benefits. It is safe to say that on an average, senior citizens who have just attained the age of 60 have 12-15 years of time to devote to investments. In such cases, ELSS generates the best returns as it has been seen that on a long term basis ELSS reaps highly profitable gains. Thus both tax savings and high profits requirements are met, which is essential for senior citizens.
Judicious Investment in ELSS is Completely Risk-Free
It is obvious that a risk factor is involved with ELSS as the scheme depends largely on unpredictable market trends. Though in the long run, it is almost always advantageous, senior citizens might have to think twice before taking the risk. But let us consider the positive side here: ELSS generates excellent returns with tax benefits. So why not avail these benefits in parallel to taking a safe route? Thus judicious investment must be made in ELSS. Instead of complete exposure to ELSS, part of investment must be made in it. With an initial investment cost of 500 INR per month (minimum), it is an affordable option. This would ensure three things:
- Tax savings of up to 1.5 Lakhs INR through different schemes along with ELSS.
- Security provided by the investments other than ELSS will mitigate risks largely.
- ELSS will generate excellent returns.
A Regular Means Of Income
ELSS is technically an excellent retirement scheme. Low investment cost per month ( INR 500 minimum), the tax benefits plus the high return rates makes it one of the best investment scheme. The judicious investment will also lower the risk that ELSS presents. Keeping all these factors in mind including the lock-in period of 3 years an individual can take any of the following routes:
- Investing in ELSS with SIP 3 years prior to retirement: If this scheme is followed, SIP will generate monthly returns after completion of 3 years. The returns are not taxable as SIP is done under ELSS. Thus on retirement, the flow of income will not cease.
- Investing in ELSS post-retirement as savings: This is a savings option that can be considered. If investment in made in ELSS, and withdrawal is made after 3 years an average return of approximately 22.9% will be generated (as per recent calculations). Again this serves as an income source and will be beneficial in case of an emergency.