I am 57 years old. I have about Rs 3 crore in mutual funds, gold bonds and shares, Rs 1.5 crore as gratuity and PF corpus, PPF corpus of Rs 70 lakh, Ulips worth Rs 30 lakh, and a Bajaj Allianz term policy that will give me about Rs 50 lakh when I turn 65. I have a medical cover of Rs 50 lakh. I have my own house and no loans. My monthly expenses are Rs 1.5 lakh, including SIPs worth Rs 25,000. I want to quit working this year. Do I have enough investment?
Dev Ashish, Founder, StableInvestor, and Sebi-registered investment adviser:
Your financial asset base is spread across MFs, stocks, gold bonds, EPF, PPF and Ulips. We shall not consider the life insurance maturity as it will be available at the age of 65. Assuming your retirement at 57 and life expectancy of 90 years, the available corpus of about Rs 5.5 crore should be sufficient, at least mathematically. In the post-retirement phase, you need to manage asset allocation with an eye on capital preservation, income generation and inflation-beating growth. Assuming you quit work next month, it is important to identify the instruments that can generate a regular income of Rs 1.25 lakh per month. It can be from a combination of SWP from debt funds, assuming a part of the MF portfolio is positioned in debt, and PPF withdrawals. The money from EPF and gratuity needs to be prudently managed and can be parked in bonds, small-savings schemes, debt funds (or a mix of equity and debt funds) to further augment the interest income.
You may also consider SCSS and RBI Floating Rate bonds to secure interest income. Bank fixed deposits may also be considered for interest income and better liquidity. Since you are getting into retirement mode soon, it is advisable to avoid schemes/funds with high allocation to non-large-cap space. Your health insurance coverage of Rs 50 lakh should be sufficient.
My mother has Rs 2.4 crore parked in fixed deposits and Rs 20 lakh in mutual funds. She also has `55 lakh in the PPF and Rs 10 lakh in the NPS. She is 54 and has a Rs 25 lakh medical insurance. Please suggest how to invest the funds for tax-efficient and inflationproof returns, that also provide growth. Her current monthly expenses are Rs 40,000.
Prableen Bajpai, Founder, FinFix Research and Analytics:
Combating inflation is crucial during retirement years. If we assume monthly expenses as constant during retirement period, then with 6% inflation, the expenses will double in around 12 years. Your mother has financial assets worth Rs 3.25 crore, with approximately 91% allocated to fixed income. To ensure inflation-proof and tax-efficient management of funds, the asset allocation needs to be changed. The total amount can be divided into four buckets. The first bucket is for contingency funds. Though an adequate health cover is in place, a contingency fund of Rs 25 lakh should be maintained. This can be parked in an arbitrage fund to ensure good post-tax returns.
The second bucket should have funds for monthly cashflow requirements. Around Rs 1.1 crore should be invested in two funds—multi-asset and balanced advantage fund—to facilitate a systematic withdrawal of Rs 40,000 per month (adjusted for 6% inflation). Start the SWP after three years so that the fund gets time to stabilise, and taxation becomes lower (either as equity, or debt, with indexation, based on the schemes selected).
The fixed-income portfolio will constitute the third bucket. Set aside `15 lakh in bank or sweep-in fixed deposit for monthly expenses for the next three years till the SWP is started. Continue with the PPF account and extend it as it provides compounding. Another Rs 60 lakh can be parked in a combination of debt and hybrid funds to ensure reduced taxation liability as well as growth. These funds will come in handy for medium-term goals.
The final bucket will include equity mutual funds, which is currently worth Rs 20 lakh. Add another Rs 30 lakh to this corpus. Ensure a combination of active and passive equity schemes. Once the NPS matures at 60 years, the redeemable corpus can be added to equity mutual funds. The SWP can be reduced by the amount of annuity received. This is a broad investing structure, and you can make changes in the suggested allocations based on risk appetite and fund requirements.
I am a retired senior citizen (65) living with my wife (62) and son’s family. Our son is the sole breadwinner. We own the house and are debt-free. I have a corpus of Rs 40 lakh and utilise it for our daily expenses and leisure activities, without burdening our son, who handles all household expenses. Please advise on an investment plan that offers a stream of income while safeguarding the principal amount. I also want easy access to the corpus in case of health emergencies.
Adhil Shetty, CEO, BankBazaar: A combination of FDs and open-ended mutual funds can be the solution. You must maintain a strict annual withdrawal rate of 5%. For the first year, this is Rs 2 lakh. Split the rest into three buckets of short-term, medium-term, and longterm holdings. The respective risk and returns of the buckets are low, moderately high, and high. This allows you to balance liquidity and growth. A conservative, liquidity-oriented split can be 33-33-34. An aggressive, growth-oriented split is 10-40-50.
To prevent corpus exhaustion, the portfolio growth must be higher than 5%, preferably 8-10%. The first bucket can be parked in FDs, liquid MFs, or arbitrage funds. The second can be debt-oriented hybrid funds, which are slightly volatile in the short term, but offer returns higher than those of FDs over the medium term. The last bucket is equity investments, such as Nifty 50 or the Nifty Next 50 index funds. You must spend only from the first bucket, and periodically move money from the higher risk buckets to lower risk buckets (2:1 and 3:2) to optimise growth and liquidity. Buy a good health cover for yourself and your wife to cover health emergencies.
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