I will be retired from a MNC company on September, 2025
After retire, I will get my PF, Gratuity & Retirement benefit of total 86 Lac
For which, I have interested to invest like below -
1) MF-SWP in debt, conservative hybrid &BAF - 40 L - @6% withdrawal after 2 yr - 20,000/m - And 6% increase after every yr
2) SCSS - 30 L - 20,500/m
3) LIC VPBY - 6.4 L - 5000/m
4) Balance 10 L in MF-Lumpsum - Adopt 50-50 approach with 6 yr horizon so that after 6 yr 10 L corpus will be used by me and balance 10 L will be reinvested.
Please note, my age is 57 yr and my monthly expenses will be 70000/m and provision for emergency expenses will be 10000/m
I have no loan / EMI and no dependent to expense now.
My future goals are one Kid's / daughter marriage of 20 L on 2027 / 2028 , My car replacement of 5 L on 2028 and after retirement, there will be domestic vacation of 1.5 L upto my 75 yr age and every 3 yr Interval, there will be Overseas vacations of 4 L up to 75 yr age.
My current investment are as follows -
1) Bank FD - 10 L - 7000/m
2) RBI FRSB - 6 L - 4000/m
3) LIC Pension Plan - 7.75 L - 4000/m
4) MF Dividend - 4 L - 3000/m and
5) MF SWP - 45 L - 30000/m
Under my above investment scenario, requested to suggest that is it acceptable or, any specific suggestions from your end to my long term personalized Retirement Plan.
Is it my proposed investment options are acceptable to fulfill my retirement years upto 30 yrs without running out of money and also fulfill my above goals.
Ans: Your planned retirement investment strategy has a clear focus on security and stability. You aim for sustainable income with an eye on fulfilling goals like your daughter's marriage, vacations, and car replacement. Let’s evaluate each component to ensure long-term financial health.
1. Investment in MF-SWP: 40 Lakh for Monthly Income
You have proposed to invest Rs 40 lakh in Mutual Fund SWP across debt, conservative hybrid, and balanced advantage funds. Your goal is to start withdrawing Rs 20,000 per month after two years with a 6% annual increase.
Appreciation:
A Systematic Withdrawal Plan (SWP) allows flexibility.
The annual increase helps counter inflation.
Suggestions:
Starting withdrawals after two years can protect your corpus during market volatility.
However, withdrawing 6% may be high over the long run, especially with inflation. A more conservative withdrawal rate of 4-5% could offer more sustainability.
Focus on active funds with a conservative approach. Actively managed funds can potentially outperform index funds over time due to active risk management, especially in volatile markets. Index funds, by nature, may underperform during market corrections, which could erode your capital faster.
Regular funds (via a mutual fund distributor with a certified financial planner) offer professional guidance and monitoring, which is crucial, especially as markets fluctuate. Direct funds lack the advisory element and may lead to inappropriate fund selection.
Final Thoughts on MF-SWP:
Your plan is solid but consider reducing the withdrawal percentage slightly. Ensure you have a Certified Financial Planner review the fund's performance regularly to make adjustments as needed.
2. Investment in SCSS: 30 Lakh
Investing Rs 30 lakh in Senior Citizens Savings Scheme (SCSS) with a monthly return of Rs 20,500 is a stable option.
Appreciation:
SCSS is an excellent choice for a retiree. It provides fixed returns, capital protection, and regular income.
Suggestions:
SCSS is a very safe investment and should remain a core part of your plan. Ensure you renew it after five years for continuous income.
Given that SCSS interest rates are subject to government policy, review the scheme periodically. If rates decline, consider shifting a portion to other fixed-income products with better returns.
Final Thoughts on SCSS:
SCSS is reliable and essential for balancing your portfolio’s risk. Keep a check on interest rate changes and plan renewals accordingly.
3. LIC VPBY: 6.4 Lakh
Your investment in LIC’s Varishtha Pension Bima Yojana (VPBY) offers Rs 5,000 per month.
Appreciation:
VPBY offers a steady monthly income and is backed by the government, making it low-risk.
Suggestions:
This product offers financial security but returns are fixed. As it’s a long-term commitment, ensure that the payout will meet your needs even with inflation.
Evaluate if the returns from VPBY alone will support your rising expenses over the years. Inflation will erode the real value of this fixed income.
Final Thoughts on LIC VPBY:
It's a low-risk, guaranteed income option. However, ensure it remains part of a diversified income strategy to combat inflation.
4. Balance 10 Lakh in MF Lumpsum: Adopt 50-50 Approach
You propose to invest Rs 10 lakh in a 50-50 approach, with a six-year horizon.
Appreciation:
The 50-50 strategy, which likely refers to splitting between equity and debt, is a balanced approach.
Suggestions:
For the equity portion, focus on actively managed funds. This will allow for potentially higher returns compared to index funds, especially if the market faces fluctuations.
For debt, choose high-quality funds with a strong track record. Conservative hybrid funds or debt mutual funds can offer stability while growing your capital over time.
After six years, review your strategy and reinvest intelligently. Consider keeping a portion in hybrid funds or SWP to ensure you have regular income without depleting the corpus entirely.
Final Thoughts on 50-50 Strategy:
This strategy is sound. However, actively managed funds should be a part of it for optimal performance. Stay vigilant and re-evaluate after six years.
Current Investments and Monthly Income
You currently have:
Bank FD: Rs 10 lakh, generating Rs 7,000 per month
RBI FRSB: Rs 6 lakh, generating Rs 4,000 per month
LIC Pension Plan: Rs 7.75 lakh, generating Rs 4,000 per month
MF Dividend: Rs 4 lakh, generating Rs 3,000 per month
MF SWP: Rs 45 lakh, generating Rs 30,000 per month
Appreciation:
Your diversified income sources ensure multiple streams of regular cash flow.
The mix of fixed and market-linked returns is well thought out.
Suggestions:
Continue monitoring the performance of your mutual fund dividends and SWP. The market-linked returns may fluctuate, so regular reviews are necessary.
You are generating a total monthly income of Rs 48,000, excluding your proposed new investments. This falls short of your planned Rs 70,000 monthly expense. Therefore, your planned additional investments, especially in MF SWP and SCSS, are crucial to bridge the gap.
Consider keeping Rs 10 lakh in a liquid or ultra-short-term debt fund for emergency expenses. This can provide higher returns than a savings account and still be accessible when needed.
Final Thoughts on Current Investments:
Your current investments are well-balanced, but regular reviews and rebalancing will help maintain their effectiveness over the long term.
Future Goals and Planning
Your future goals include:
Daughter’s Marriage: Rs 20 lakh in 2027/2028
Car Replacement: Rs 5 lakh in 2028
Domestic and Overseas Vacations: Rs 1.5 lakh for domestic trips and Rs 4 lakh for overseas trips every three years until you are 75 years old
Appreciation:
Your future goals are well defined, and your plan to allocate specific amounts for them shows good foresight.
Suggestions:
For your daughter's marriage, continue investing in a combination of debt and equity funds to grow the corpus.
Consider creating a separate fund for vacations and car replacement. These are predictable expenses and can be planned in advance using a mix of short-term and long-term debt instruments to match your time horizons.
Final Thoughts on Future Goals:
Your goal planning is practical. However, allocate separate funds for each goal to avoid dipping into your retirement corpus prematurely.
Assessing Overall Retirement Sustainability
You have planned for a monthly expense of Rs 70,000 plus Rs 10,000 for emergencies. With your proposed and current income sources, your monthly income can meet this comfortably, provided the funds are managed well and the withdrawal rate is sustainable.
Suggestions:
You aim to live off your investments for the next 30 years. Keep a conservative withdrawal rate (4-5%) from your SWP to avoid running out of money too early.
Inflation will impact your living costs. Ensure your portfolio has enough equity exposure to allow for growth and offset the cost of living increases.
Regularly review your investment performance. You may need to adjust your strategy depending on market conditions, particularly when it comes to SWPs and dividends.
Final Thoughts on Retirement Sustainability:
Your plan is generally well-structured, but regular monitoring and slight adjustments can ensure that your retirement years remain financially secure without depleting your resources.
Final Insights
Your retirement investment plan is thoughtful and comprehensive. You have diversified well across different income streams, including fixed-income schemes and market-linked instruments. Keep reviewing your withdrawal rates, inflation impact, and fund performance to ensure long-term sustainability.
Make sure to re-evaluate your strategy periodically, especially every three to five years, to ensure it meets your needs and goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/
Question by Prakash on Jun 26, 2024Hindi
