How do I earn monthly income of 2 lakhs post retirement which is 15 years away? Please suggest options

Ans: Is it ok if you get 2500/- per month ?

Ans: Congratulations on managing your finances so well! With Rs 1.5 crore in mutual funds, Rs 1.2 crore in bank FDs, Rs 65 lakhs in your savings account, and Rs 50 lakhs in the Senior Citizen Savings Scheme, you are in a strong financial position. Drawing Rs 85,000 as a pension monthly is also commendable. Now, let’s plan how you can achieve a monthly income of Rs 2,50,000 in three years.

Compliments and Encouragement
You’ve done an excellent job securing your retirement. Your diversified portfolio and thoughtful planning reflect your diligence and foresight. This is a great foundation to build on for your future financial goals.

Analyzing Your Current Income and Assets
Monthly Pension
Your current monthly pension is Rs 85,000. This is a stable and reliable source of income.

Mutual Funds
You have Rs 1.5 crore invested in mutual funds. These can potentially offer higher returns, especially if well-diversified and managed actively.

Fixed Deposits
Rs 1.2 crore in fixed deposits provides safety and liquidity but generally offers lower returns compared to mutual funds.

Savings Account
You have Rs 65 lakhs in a savings account. This amount should be managed effectively to earn better returns while maintaining liquidity for emergencies.

Senior Citizen Savings Scheme
The Rs 50 lakhs in the Senior Citizen Savings Scheme offers a steady interest income, which is beneficial for retirees.

Setting a Goal: Achieving Rs 2,50,000 Monthly Income
To achieve Rs 2,50,000 monthly, we need to bridge the gap between your current pension of Rs 85,000 and the target amount. This requires generating an additional Rs 1,65,000 per month.

Creating a Comprehensive Investment Strategy
Systematic Withdrawal Plans (SWPs)
Mutual funds can be structured to provide a steady income through SWPs. You can withdraw a fixed amount regularly, offering liquidity and flexibility. Considering your mutual fund corpus, SWPs can be a significant part of your strategy.

Monthly Income Plans (MIPs)
Consider MIPs that balance between debt and equity. These can provide regular income with moderate risk. They are ideal for retirees seeking stable returns with some growth potential.

Debt Mutual Funds
Debt funds offer stability and regular income with lower risk. They can supplement your monthly income while preserving capital. Allocate a portion of your portfolio to high-quality debt funds.

Balanced Advantage Funds
These funds dynamically manage the allocation between equity and debt based on market conditions. They offer potential for higher returns with controlled risk, making them suitable for generating steady income.

Fixed Deposits and Senior Citizen Savings Scheme
Continue to utilize the interest from FDs and the Senior Citizen Savings Scheme. However, consider re-evaluating the allocation to maximize returns, as these instruments generally offer lower returns.

Optimizing Your Current Investments
Reassess Savings Account Balance
Having Rs 65 lakhs in a savings account is excessive for liquidity needs. Consider moving a substantial portion into higher-yield investments while keeping a sufficient amount for emergencies.

Review Mutual Fund Portfolio
Work with a Certified Financial Planner (CFP) to review your mutual fund portfolio. Ensure it’s diversified across equity, debt, and hybrid funds to optimize returns and manage risks.

Laddering Fixed Deposits
Laddering involves staggering the maturity dates of FDs. This strategy ensures liquidity at regular intervals and captures better interest rates over time. Reinvest matured FDs in higher-yield instruments or structured plans.

Maximizing Tax Efficiency
Tax-Efficient Instruments
Consider tax-efficient instruments to minimize tax liabilities. Utilize the tax benefits under Sections 80C, 80D, and other applicable sections to enhance post-tax returns.

Tax Planning with Mutual Funds
Equity mutual funds held for over a year benefit from long-term capital gains tax rates. Debt funds held for more than three years offer indexation benefits, reducing tax liabilities.

Maintaining an Emergency Fund
An emergency fund covering 6-12 months of expenses is essential. Ensure this fund is easily accessible and invested in liquid or ultra-short-term funds for quick access.

Regular Portfolio Review and Rebalancing
Periodic Reviews
Regularly review your portfolio to ensure it remains aligned with your goals. Market conditions and personal circumstances change, necessitating adjustments.

Rebalancing
Rebalance your portfolio to maintain the desired asset allocation. This involves selling assets that have grown significantly and reinvesting in underperforming assets to keep the portfolio balanced.

Leveraging Professional Guidance
Certified Financial Planner (CFP)
A CFP can provide personalized advice, portfolio reviews, and rebalancing. Their expertise ensures your investments are optimized for your goals.

Monitoring Market Trends
Stay Informed
Keep abreast of market trends but avoid impulsive decisions. Focus on long-term trends and adapt your strategy with the guidance of a CFP.

Educating Yourself
Financial Literacy
Continue educating yourself about financial products and market trends. This empowers you to make informed decisions and enhances your financial planning.

Potential Risks and Mitigation
Market Volatility
Investing in mutual funds and other market-linked instruments involves risk. Diversification and regular reviews help mitigate these risks.

Inflation
Ensure your portfolio grows faster than inflation to maintain purchasing power. Equity and balanced advantage funds typically offer inflation-beating returns.

Generating Additional Income
Part-Time Consulting or Freelancing
If you’re open to it, consider part-time consulting or freelancing in your field. This can supplement your income and keep you engaged.

Planning for Healthcare
Adequate Health Insurance
Ensure you have comprehensive health insurance. Healthcare costs can be significant, and having adequate coverage protects your financial health.

Final Insights
Achieving a monthly income of Rs 2,50,000 is a realistic goal with careful planning. Your diversified portfolio and current assets provide a strong foundation. By strategically investing your savings and optimizing current investments, you can bridge the income gap. Continue working with a Certified Financial Planner to review and rebalance your portfolio regularly. Stay informed and educated to make informed decisions. Your disciplined approach and thoughtful planning will lead to financial success and stability in your retirement years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Creating a Retirement Corpus for a Monthly Income of Rs 2 Lakh

Understanding the Goal

To generate Rs 2 lakh per month post-retirement, you'll need a substantial corpus. Considering a conservative withdrawal rate of 4 per cent per year, you'll need approximately Rs 6 crore. This means you'll need to increase your current investments significantly over the next 15 years

Strategies to Achieve Your Goal:

1. Increase Monthly Contributions:

• Assess affordability: Determine how much more you can contribute each month to your investments.
• Consider additional income sources: Explore side hustles or part-time work to increase your income.

2. Optimise Existing Investments:

• Review your MF portfolio: Ensure your investments align with your risk tolerance and long-term goals.
• Rebalance regularly: Periodically adjust your asset allocation to maintain your desired risk-return profile.

3. Explore Alternative Investments:

• Real estate: Consider investing in rental properties for passive income.
• Equity investments: Explore direct stock investments or ETFs for potentially higher returns.
• Annuities: Purchase an annuity to provide a guaranteed income stream in retirement.

4. Leverage Tax Benefits:

• Utilise tax-saving instruments: Maximise investments in tax-saving options like ELSS, NPS, and PPF.
• Consult a tax advisor: Understand the tax implications of different investment strategies.

5. Consider Professional Advice:

Seek guidance from a financial advisor: A professional can help create a personalized retirement plan tailored to your specific needs and risk tolerance.

Example Calculation:

Assuming an annual return of 10 per cent on your investments, you'll need to contribute approximately Rs 25,000 per month to reach Rs 6 crore in 15 years This is a significant amount, but achievable with disciplined saving and investing.

Remember:

• Inflation: Factor in inflation when calculating your required retirement corpus.
• Emergency fund: Maintain an emergency fund to cover unexpected expenses.
• Risk tolerance: Choose investments that align with your comfort level.
• Regular review: Periodically assess your progress and make adjustments as needed.

By following these strategies and making consistent contributions to your investments, you can increase your chances of achieving your goal of a Rs 2 lakh monthly income post-retirement.

Ans: You have Rs 17 lakhs from gratuity.

Rs 8 lakhs from earned leave encashment.

Rs 12 lakhs from EPF.

Rs 65 lakhs in bank savings.

Total retirement corpus is Rs 1.02 crore.

That’s a good sum for retirement planning.

You should protect this money for regular income.

It’s important to have liquidity and safety.

Your retirement income needs careful planning.

Immediate Needs and Emergency Fund

Keep Rs 5 to 10 lakhs as emergency fund.

This should be in a safe liquid option.

Use a high-interest savings account or liquid funds.

This ensures you can manage any sudden needs.

Emergency fund gives peace of mind.

Don’t invest this money in risky options.

Debt Repayments and Obligations

If you have any debts, try to clear them.

Retiring with no debts is very important.

Interest on loans can eat your income.

If you have loans, repay them from the corpus.

Then focus on investing for monthly income.

Health and Insurance Planning

Make sure you have a good health cover.

Medical expenses can be heavy after retirement.

A family floater plan is helpful.

Top-up plans can also reduce medical burden.

Don’t depend only on employer-provided insurance.

Health insurance premiums rise with age.

So, take cover while you are still healthy.

Regular Income Strategies

You need a steady monthly income.

Avoid investing everything in one product.

Diversify to get a mix of safety and returns.

Use 3 to 4 types of investments.

Mix debt and equity mutual funds for growth and income.

Also, have some safe instruments for surety.

Debt-Based Investments for Stability

Use senior citizen saving schemes and post office schemes.

These give steady interest.

They are safe and government-backed.

These can meet some part of your monthly needs.

These can be your core income source.

Equity Mutual Funds for Growth

Equity mutual funds are important for beating inflation.

Don’t invest all in equity, but have some portion.

They give better returns over time.

You can invest in balanced funds or hybrid funds.

These funds reduce risk compared to pure equity.

They help your money grow for 20-25 years of retirement.

Avoid index funds.

Index funds only copy market, they don’t beat market.

Actively managed funds have professionals managing money.

They try to get better returns than index.

This extra effort can give you better income in retirement.

Disadvantages of Direct Funds

Direct funds are cheaper, but they need more attention.

You need to track performance yourself.

This is not easy for a retired person.

A certified financial planner guides better in regular plans.

Regular funds through MFDs with CFP support give comfort.

CFPs do periodic review and rebalancing.

This can help you protect and grow retirement money.

Systematic Withdrawal Plans (SWPs)

You can use SWPs from mutual funds.

This gives monthly income like a pension.

You decide how much you need each month.

SWPs are tax efficient compared to FDs.

They help your money last longer.

Taxation Aspects

For equity mutual funds, long-term gains over Rs 1.25 lakh are taxed at 12.5%.

Short-term gains taxed at 20%.

For debt funds, gains are taxed as per your slab.

Keep this in mind while planning SWP.

Plan withdrawals to reduce tax impact.

Certified financial planner can help here.

Bank FDs and Safety

Some part of your money can be in bank FDs.

Choose short tenure FDs of 1-2 years.

Renew them for better rates and safety.

Don’t put everything in long-term FDs.

Keep some flexibility for future needs.

Asset Allocation and Diversification

Divide your corpus in 3 parts.

1st part in safe debt products for sure income.

2nd part in balanced funds for growth and income.

3rd part in equity mutual funds for long-term growth.

This gives balance of safety, income and growth.

Review it every year for changes.

Regular Monitoring and Rebalancing

Don’t leave investments unattended.

Market changes affect risk and returns.

Every year, check if you need to adjust.

A certified financial planner can do this.

Rebalancing keeps your money safe and growing.

Monthly Income Planning

Estimate how much you need every month.

Include rent, groceries, medical and entertainment.

Make sure investments cover this comfortably.

Don’t withdraw more than what investments can support.

This ensures your money lasts through retirement.

Family and Legacy Planning

Think about family needs too.

Make a will for your assets.

This avoids family disputes later.

Discuss with family and a certified financial planner.

Have nominations in all investments.

Update them if family situation changes.

Avoid High-Risk Investments

Don’t put retirement money in risky options.

Avoid stock trading or crypto.

These can erode your money.

Stick to safe, managed funds.

Let professionals manage risks.

Review of Insurance Policies

If you have old insurance policies, check them.

ULIPs and investment policies may not suit your goals now.

If you have such policies, check surrender value.

It may be better to exit and move to mutual funds.

This can give better income and flexibility.

Future Lifestyle Adjustments

Be realistic about lifestyle in retirement.

Adjust spending to your income flow.

Avoid big purchases if money is tight.

Focus on health and peace of mind.

Benefits of Working with a Certified Financial Planner

A CFP will understand your needs.

They will make a plan that suits your comfort.

They also track your investments.

CFPs suggest changes if market changes.

This ensures you always have enough.

They work with you, not just sell products.

What to Avoid

Avoid real estate investments.

Real estate is illiquid and needs large sums.

It may not give monthly income.

Also hard to sell quickly in need.

Avoid index funds and direct funds.

Regular mutual funds with MFD and CFP is better.

Final Insights

You have built a good retirement corpus.

Protect it with proper allocation.

Use debt options for safety.

Use equity mutual funds for growth.

Get monthly income from SWP and safe options.

Work with a certified financial planner for peace.

Review plan every year for long life income.

Enjoy retirement with health and family.

Stay away from risky ideas.

Your retirement can be secure and peaceful.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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