I am 56 completed and working in an MNC.With 3-4 years of active life left out , what type of Pension plan I can adopt. Please guide me. Bikram K.Giri

Ans: There are various types of pension plans available in the market like those offered by Insurance companies, National Pension Scheme and Mutual Funds.

Insurance offered pension plans could be Immediate Annuity Plan, Guaranteed Period Annuity Plan, Life annuity plan etc which generally offer assured income to you. However, the returns are very low and high taxability make them quite expensive. I feel that the lure of assured income does not fully compensate you for what you lose in the bargain.

I feel that using Mutual Funds to create retirement income is much better alternative since it gives you far greater flexibility of investment, withdrawal, changing course any time as per your requirements and very high tax-efficiency.

Before choosing an option for your retirement, I suggest you to consult with a good financial advisor for the best suitable advice.

Ans: Retirement planning is a crucial phase in one’s financial journey. As you plan to retire in four years, it’s essential to create a robust plan that ensures financial security and stability. You have diligently saved and invested over the years, and now it’s time to optimize those investments to ensure a comfortable retirement. Let's delve into a comprehensive retirement strategy tailored to your needs.

Current Financial Position
You have done a commendable job with your savings. Here’s a summary of your current financial status:

For Yourself:

Fixed Deposit (FD): Rs 70 lakh
Mutual Funds (MF): Rs 25 lakh
Post Office Monthly Income Scheme (MIS): Rs 15 lakh
Kisan Vikas Patra (KVP): Rs 5 lakh
Life Insurance Corporation (LIC) Policies: Rs 32 lakh
For Your Daughter:

LIC Policies: Rs 16 lakh
Public Provident Fund (PPF): Rs 14 lakh
Fixed Deposit (FD): Rs 5.5 lakh
You’ve built a solid financial foundation, ensuring both your retirement and your daughter’s future needs are considered. Let’s analyze and optimize this portfolio for maximum benefit.

Diversification and Liquidity
Diversification is key to a well-rounded retirement portfolio. Your current investments are diversified across various instruments. However, ensuring sufficient liquidity is equally important. Liquidity means having access to cash when needed, without significant losses.

Fixed Deposits (FDs):

FDs offer security and assured returns but have lower liquidity. Upon maturity, reinvest them in a mix of debt and equity mutual funds for better returns and liquidity.

Mutual Funds (MFs):

Your mutual fund investments provide growth potential. Review your portfolio to ensure a balanced mix of large-cap, mid-cap, and multi-cap funds. Focus on actively managed funds for better returns.

Post Office Monthly Income Scheme (MIS):

MIS is a reliable source of regular income. Upon maturity, consider investing the proceeds in hybrid funds, which offer a balance of equity and debt.

Kisan Vikas Patra (KVP):

KVP is a long-term investment with tax benefits. Hold it until maturity to benefit from its assured returns. Upon maturity, reinvest in balanced mutual funds.

Life Insurance Corporation (LIC) Policies:

LIC policies provide security but might not yield high returns. Evaluate if surrendering or continuing them aligns with your goals. Surrender and reinvest in mutual funds for potentially higher returns, if it fits your risk profile.

Planning for Retirement Income
A successful retirement plan ensures regular income to meet expenses. Let’s create a sustainable income plan from your existing assets.

Systematic Withdrawal Plans (SWPs):

Utilize SWPs from your mutual funds for regular income. This ensures a steady cash flow while keeping your capital invested for growth.

Monthly Income from Post Office MIS:

Continue receiving monthly income from your Post Office MIS. This adds to your regular income stream.

Interest from Fixed Deposits:

Interest from FDs can supplement your income. Reinvest the principal amount wisely upon maturity.

Health Insurance and Emergency Fund
Healthcare expenses can be significant during retirement. Ensure you have adequate health insurance coverage.

Health Insurance:

Review and enhance your health insurance coverage. Opt for a comprehensive plan that covers hospitalization, critical illness, and outpatient expenses.

Emergency Fund:

Maintain an emergency fund equivalent to six months of expenses. This should be in a liquid asset like a savings account or liquid mutual fund.

Estate Planning and Legacy
It’s essential to have a plan for transferring your wealth to your heirs.

Will and Estate Planning:

Create a will to ensure your assets are distributed as per your wishes. Consider consulting an estate planning professional for a detailed plan.

Nominees and Beneficiaries:

Ensure all your investments have updated nominees and beneficiaries. This simplifies the transfer process.

Investment Strategy for Your Daughter
You’ve made significant investments for your daughter. Let’s optimize these for her future needs.

LIC Policies:

Evaluate the performance of LIC policies. If returns are low, consider surrendering and reinvesting in mutual funds for higher growth potential.

Public Provident Fund (PPF):

PPF is a great investment for long-term growth and tax benefits. Continue investing in PPF for assured returns and tax benefits.

Fixed Deposits (FDs):

FDs offer safety but lower returns. Upon maturity, consider investing in equity mutual funds for better returns, considering her long-term needs.

Tax Planning and Efficiency
Efficient tax planning enhances your retirement corpus. Utilize tax-saving instruments to minimize tax outgo.

Section 80C Investments:

Continue utilizing Section 80C deductions through PPF, ELSS, and insurance premiums. This reduces your taxable income.

Tax-efficient Withdrawals:

Plan your withdrawals from investments in a tax-efficient manner. Withdraw from tax-free instruments first to minimize tax liability.

Regular Portfolio Review
Regular reviews ensure your portfolio remains aligned with your goals.

Annual Reviews:

Conduct an annual review of your portfolio. Adjust allocations based on performance and changing needs.

Certified Financial Planner:

Consult a Certified Financial Planner for personalized advice. They can help optimize your investments and ensure you stay on track.

You’ve done an excellent job in planning for your future and your daughter’s. Your diversified portfolio shows a good understanding of different investment options. You’ve balanced safety and growth potential well. Your foresight in starting early and choosing varied instruments is commendable.

Final Insights
Retirement planning is an ongoing process that requires careful thought and regular adjustments. With your current assets and strategic adjustments, you’re well-positioned for a secure retirement. Focus on liquidity, regular income, and tax efficiency. Ensure your daughter’s future is well-planned and secure.

Investing wisely, keeping a balanced portfolio, and regular reviews will help you achieve your retirement goals. Continue to stay informed and proactive about your financial health.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in