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NRI Retiree Seeking Investment Advice for 4 Lakh Monthly Income

Ramalingam

Ramalingam Kalirajan  |8192 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 22, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
SANKARA Question by SANKARA on Aug 22, 2024Hindi
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Dear Sir, I am a NRI and planning to retire by end of 2025. I have currently savings in MF and deposits totaling 1.8 crores. Until my retirement next year can save 1.25 crore more. I have Insurance plan and I will get approx.1.25 crores pay outs in Total in 2026/2028/2029 (Total) . My EMI for my current house is fully paid. I also two properities and I expect to sell both by end of 2025 and will get approx. 1.25 crores. I would like to seek you advise on parking my funds and FD's so that after my retirement I can get approx. 4 lacks per month. Looking for your advise.

Ans: You aim to retire by the end of 2025 and generate an income of approximately Rs. 4 lakh per month post-retirement. You have savings, potential insurance payouts, and expected property sales that will contribute to your retirement corpus. Let’s explore how to achieve your monthly income goal while maintaining financial security.

Assessing Your Retirement Corpus
By the end of 2025, your total retirement corpus is expected to be:

Current Savings: Rs. 1.8 crores in mutual funds and deposits.
Future Savings: Rs. 1.25 crores you plan to save by the end of 2025.
Insurance Payouts: Rs. 1.25 crores expected between 2026 and 2029.
Property Sales: Rs. 1.25 crores expected from selling your two properties.
This brings your total potential corpus to Rs. 5.55 crores.

Strategic Allocation of Funds
To generate Rs. 4 lakh per month post-retirement, a combination of debt and equity mutual funds is advisable. This strategy will allow you to benefit from market growth while ensuring stability through debt instruments.

1. Debt Mutual Funds for Stability
Debt mutual funds provide stable returns with lower risk compared to equity. These funds can form the backbone of your retirement income strategy.

Systematic Withdrawal Plan (SWP): By investing a portion of your corpus in debt mutual funds, you can set up an SWP. This will allow you to withdraw a fixed amount monthly, ensuring a steady income.

Allocation Suggestion: Allocate about 60-70% of your corpus to debt funds. This would be around Rs. 3.33-3.88 crores. The expected returns, combined with SWP, can provide a significant portion of your monthly requirement.

2. Equity Mutual Funds for Growth
While debt funds offer stability, equity mutual funds provide the growth needed to counter inflation over the long term.

Systematic Transfer Plan (STP): Invest in equity funds through an STP from debt funds. This strategy will allow you to gradually move funds into equity, reducing market timing risk.

Allocation Suggestion: Allocate about 20-30% of your corpus to equity mutual funds, which would be around Rs. 1.11-1.66 crores. The growth potential of equity will help maintain the purchasing power of your withdrawals over time.

3. Maintaining Liquidity and Safety
While the above strategies focus on income generation, it’s essential to maintain a portion of your corpus in liquid and safe instruments.

Emergency Fund: Set aside at least Rs. 20-30 lakhs in a savings account or liquid fund. This will serve as your emergency fund, ensuring you can cover unexpected expenses without disrupting your investment strategy.

Fixed Deposits: While FDs are not the primary income generator, a small allocation (around 10%) can be kept in FDs for short-term needs. This would be about Rs. 55 lakhs.

Generating Rs. 4 Lakhs Monthly
To achieve a monthly income of Rs. 4 lakhs, you can utilize the SWP from debt funds, supplemented by equity fund returns.

Debt Fund SWP: A well-structured SWP from debt mutual funds can provide the stability and predictability required for your monthly income.

Equity Fund Growth: The equity portion will provide the necessary growth to keep your income rising with inflation.

Monitoring and Adjusting
Your financial plan requires regular monitoring to ensure it remains aligned with your goals.

Annual Review: Review your portfolio annually to make necessary adjustments based on market conditions and your evolving needs.

Rebalancing: Periodically rebalance your portfolio to maintain the desired debt-equity ratio, ensuring continued growth and stability.

Final Insights
To achieve your post-retirement goal of Rs. 4 lakh per month, a combination of debt and equity mutual funds, utilizing SWP and STP strategies, is more effective than relying solely on fixed deposits. This approach provides a balance of growth and stability, ensuring that your corpus lasts throughout your retirement.

Debt Funds for Stability: Use debt funds for a steady monthly income through SWP.
Equity Funds for Growth: Invest in equity funds to combat inflation and enhance returns.
Maintain Liquidity: Keep a portion in liquid and safe instruments for emergencies.
Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8192 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Mar 24, 2025

I am a government employee and retiring from service by FEB 2025. I will get monthly pension of RS 53,000/-. In addition to that i will get retirement benefits of around 70 lakhs. I don't have any debt and responsibilities and residing in my own house. I am having knowledge in MF & Stock market also. My pension is sufficient for monthly expenses and my spouse salary will be utilized for SIPS & Savings. My question is how to park this 70 lakhs to get maximum interest with minimum risk ? I am having knowledge in MF & Stock market.
Ans: You are in a comfortable financial position with a stable pension, no debt, and Rs 70 lakh in retirement benefits. Since your pension is sufficient for your monthly expenses, you can focus on investing this amount for safety, regular income, and long-term growth.

A well-structured portfolio will help you:

Generate passive income to complement your pension.

Preserve capital with low-risk instruments.

Ensure growth to beat inflation over the long term.

Maintain liquidity for emergencies.

Let’s break down an optimal investment strategy.

1. Emergency Fund (Rs 10 Lakh)
Even though your pension covers your regular expenses, keeping an emergency fund is essential. This will provide liquidity for unexpected expenses like medical needs or home repairs.

Rs 5 lakh in a high-interest savings account for instant access.

Rs 5 lakh in a liquid mutual fund for slightly better returns while maintaining accessibility.

Why?

Provides financial security.

Ensures quick access to funds in case of emergencies.

2. Safe Income Generation (Rs 30 Lakh)
You need stable and risk-free income sources that generate higher returns than savings accounts.

Rs 15 lakh in the Senior Citizen Savings Scheme (SCSS)

SCSS currently offers around 8.2% interest, payable quarterly.

Maximum investment per person is Rs 30 lakh, but you can start with Rs 15 lakh.

Lock-in period: 5 years, extendable by another 3 years.

Rs 10 lakh in RBI Floating Rate Bonds

Interest rate: Varies with market rates, currently around 8.05%.

Lock-in: 7 years, but stable returns without reinvestment risk.

Rs 5 lakh in Fixed Deposits (FD) with laddering

Split the investment across 1, 2, 3, and 5-year FDs.

This ensures periodic liquidity while earning better interest rates.

Why?

Provides steady cash flow to complement your pension.

Ensures principal safety with government-backed schemes.

3. Growth-Oriented Investments (Rs 30 Lakh)
Since your pension covers expenses, you can allocate a portion of your retirement benefits to growth investments for long-term wealth creation.

Rs 10 lakh in Large-Cap Mutual Funds

Invest in diversified equity mutual funds with a large-cap focus.

These funds are relatively stable and provide inflation-beating returns.

Rs 10 lakh in Balanced Advantage or Hybrid Funds

These funds adjust equity and debt allocation based on market conditions.

Offer moderate risk with downside protection.

Rs 5 lakh in Direct Equity (Stocks)

Invest in blue-chip stocks that have consistent dividend payments.

Stocks with strong fundamentals will provide capital appreciation.

Rs 5 lakh in REITs or Gold ETFs

Real Estate Investment Trusts (REITs) provide rental income without property management hassles.

Gold ETFs act as a hedge against inflation.

Why?

Generates higher returns than fixed-income investments.

Keeps capital appreciating over time.

4. Tax Planning Considerations
Since you have a pension of Rs 53,000 per month, your annual income will be over Rs 6 lakh. Investment choices should also consider taxation.

SCSS and RBI Bonds Interest is taxable as per your income tax slab.

Long-Term Capital Gains (LTCG) on equity above Rs 1.25 lakh is taxed at 12.5%.

Dividends from stocks and mutual funds are added to taxable income.

To optimise tax efficiency:

Consider tax-free options like PPF (if you have an active account).

Use mutual funds with lower turnover to reduce tax impact.

5. Asset Allocation Strategy

To ensure a balanced approach between safety, growth, and liquidity, you can follow this allocation:


a) Emergency Fund - 10 Lacs - Quick access for unforeseen needs
b) Fixed-Income & Safe Returns - 30 Lacs - Regular income with capital protection
c) Growth Investments - 30 Lacs - Capital appreciation & wealth creation

Risk Management:

Your portfolio maintains a 50:50 ratio between safe and growth assets.

This ensures stability, liquidity, and inflation-beating returns.

Final Insights
You have the advantage of a pension, which covers daily expenses. This allows your investments to focus on wealth creation, steady returns, and capital appreciation.

First, secure emergency funds.

Next, build stable income sources.

Then, focus on high-return growth investments.

Finally, optimise taxation to maximise gains.

For personalised investment planning, consult a Certified Financial Planner (CFP) like us.

Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner

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

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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