66 & Retired: Securing My Future With Limited Savings - What Are My Options?

I am 66 years old and retired in 2019 with a retirement settlement corpus of 70 lakhs. I also inherited 50lakhs. I own a flat in MP valued at 1.4 cr. This is mortgaged as collateral for my daughter's international education to the tune of 32 lakhs. I also own a flat in mumbai worth 2.4 crores and another small real estate investment worth 25 lakhs. Due to improper investments and no income for last five years and also the fact that I have been living in MP while my wife with two adult kids was living in mumbai, we have consumed most of the corpus on living and managing two homes and now have only about 40 lacs in savings.. We dont have any other loans. My wife has to take care of her 85 yr old mother who has willed my wife her flat located in another city which is worth 1.2 crore and has about 50 lacs in FDs... Please advise on what is the best way ahead to secure our future and most important, generate a monthly income.

Ans: Hello;

Prudent fiscal planning and discipline is very important in retirement.

Your family may stay together for cost optimization and avoiding duplication of expenses.

The other property may be sold, after releasing encumbrances, if any.

You may buy immediate annuity from a life insurance company from the proceeds of property sale to get monthly income as per the annuity rate offered by the insurance company.

Later you may sell inherited property to boost your annuity income.

Best wishes;

Ans: You have a mix of assets, including properties, inheritance, and some remaining savings. Here’s a quick overview of your current situation:

Retirement Corpus: Rs 70 lakhs, now reduced to Rs 40 lakhs due to consumption and lack of regular income.
Inheritance: Rs 50 lakhs (inherited amount) plus a flat worth Rs 1.2 crores.
Real Estate: You own two flats—one in MP worth Rs 1.4 crores (mortgaged for your daughter’s education) and one in Mumbai valued at Rs 2.4 crores.
Family Situation: Your wife is managing her 85-year-old mother’s care, and you have two adult children—one abroad and one earning an income.
Key Financial Goals
Your primary goals are:

Generate a monthly income of Rs 1 lakh.
Secure the future with a sound investment strategy.
Consolidate and decide on the real estate properties to optimize finances.
Assessment of Current Income and Expenses
Your primary source of income seems to be from existing savings, and you are seeking monthly income of Rs 1 lakh. Here's how we can approach this:

Income Generation Goal
To generate a monthly income of Rs 1 lakh, you need to explore investment options that provide consistent returns. Here’s an analysis of what’s required:

Total Monthly Income Needed: Rs 1 lakh.
Required Corpus to Generate Rs 1 Lakh per Month: At an expected return of 6–8% from low-risk investments, the corpus required could be around Rs 1.5 to Rs 2 crore. However, since you have existing assets, we will incorporate them into your strategy.
Existing Savings and Assets
You have Rs 40 lakhs in savings, which is a good start. But this is not sufficient on its own to generate Rs 1 lakh monthly income.

Property Consolidation
You currently own several real estate assets, which can be valuable for securing your future income. Here's the breakdown:

MP Property (Rs 1.4 crores): This property is mortgaged for your daughter’s education, with a loan of Rs 32 lakhs. If the loan burden is manageable and you do not need to sell this property for your daughter’s education loan, it may not require immediate action.

Mumbai Property (Rs 2.4 crores): This property is valuable and could be considered for sale, provided it doesn’t interfere with any personal or emotional preferences tied to the asset. Selling this property can free up a significant amount of capital to be reinvested and generate income.

Additional Small Property Investment (Rs 25 lakhs): This could either be sold to free up funds for better investment or retained, depending on its rental income potential.

What to Do with the Properties?
Sale of Mumbai Property: If you decide to sell the Mumbai flat (Rs 2.4 crore), the capital released can be used to create a stable income stream through safer, higher-return investments such as fixed income securities or equity mutual funds with a focus on dividends. This could address the immediate need for regular income.

Renting the Properties: Alternatively, you could look at renting out the Mumbai or MP properties to generate rental income. However, this approach depends on the rental yield, which might not be as high as you need to generate Rs 1 lakh monthly.

Investment Strategy for Generating Monthly Income
Here’s a detailed approach to generating monthly income from your investments:

1. Create a Balanced Portfolio for Income Generation
Debt Funds: A portion of your corpus (approximately Rs 60-70 lakhs) should be invested in high-quality debt funds, which offer better returns than fixed deposits and provide stability. For monthly payouts, you can consider Monthly Income Plans (MIPs) or dynamic bond funds that focus on consistent income.

Dividend-Paying Equity Funds: You can invest in equity mutual funds that focus on dividend-paying stocks. These funds generate regular dividend payouts, which can supplement your income. The ideal percentage of your total investment to allocate here depends on your risk tolerance, but a conservative allocation of 20-30% of your corpus would be wise.

Senior Citizen Savings Schemes (SCSS): If you are eligible, investing in the Senior Citizen Savings Scheme (SCSS) could be a good option. This government-backed scheme provides regular income with a higher interest rate compared to regular bank fixed deposits.

Fixed Deposits and Bonds: Some portion of the corpus should be parked in fixed deposits and bonds for safety and predictable returns. You can invest in long-term fixed deposits or tax-free bonds to maintain liquidity while still earning a stable income.

2. Safe Investment Options for Regular Income
Systematic Withdrawal Plans (SWP): An SWP can be created from equity mutual funds. You can withdraw a fixed amount regularly from your mutual fund investment without redeeming the entire investment. SWP provides a disciplined way to take a monthly income from mutual funds.

Post Office Monthly Income Scheme (POMIS): This government-backed scheme offers monthly payouts and is a low-risk option. However, the returns are relatively lower compared to other options, so it should be part of a diversified portfolio.

Final Insights
Real Estate: Consider selling the Mumbai property to release capital. Use the funds for safer income-generating investments. You can also explore renting properties for a steady income stream.
Investment for Monthly Income: Invest your corpus in a mix of debt funds, dividend-paying equity funds, and government-backed schemes.
Diversification: Spread your investments across asset classes (debt, equity, and government schemes) to generate income while managing risks.
Tax Efficiency: Be mindful of tax implications on withdrawals and capital gains to maximize returns.
With careful planning and prudent investment choices, you can generate the monthly income you need while securing your financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment