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Ramalingam Kalirajan |10879 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 21, 2025

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

Asked by Anonymous - Aug 20, 2025Hindi

Hi All, One of my uncle, 65 year old a retired person. He is having 20 lakh rupees as retirement fund. Please tell how should he invest it so that he can get monthly income after 5 years because he doesn't get pension. He wants to invest this amount in such a way that he can get a good amount monthly after 5 years, he can manage for 5 years if he will not take any monthly income from this fund till 5 years but after 5 years he wants some amount as monthly pay out.

Ans: Your uncle has done well by keeping Rs 20 lakh as retirement fund. At 65, it is not easy to build and preserve such savings. The fact that he does not need monthly income for next 5 years makes planning easier. This gives scope for growth before withdrawals start.

» Understanding the goal
– He wants monthly income only after 5 years.
– No withdrawals will be done before that.
– So, money can be invested in growth-oriented options for first 5 years.
– After 5 years, corpus should be shifted to income mode.
– Safety and stability will then become top priority.

» Risk and return balance
– At 65, risk tolerance must be cautious.
– But avoiding growth completely is risky too.
– Inflation will reduce value of money in future.
– So some equity exposure is needed.
– But too much equity exposure can create stress.
– Balanced approach of debt and equity is best fit.

» Growth phase in first 5 years
– For first 5 years, part of corpus can go to equity mutual funds.
– These funds give higher growth potential.
– They can create bigger base for future income.
– Remaining corpus can go into debt funds for stability.
– Debt will provide protection against market falls.
– This allocation must be reviewed every year.

» Why not index funds
– Index funds look simple, but they are not ideal here.
– They copy index without active management.
– They hold weak companies along with strong ones.
– There is no risk control in falling markets.
– Actively managed funds are better in such situation.
– Skilled fund managers can protect downside and pick quality.
– For a retired person, this makes a huge difference.

» Why not direct funds
– Direct mutual funds may look cheaper.
– But they come without expert guidance.
– Most investors end up making emotional mistakes.
– They withdraw at wrong time due to fear.
– Regular plans with Certified Financial Planner avoid these errors.
– Ongoing advice helps with rebalancing and tax management.
– The extra cost is small compared to peace and safety.

» Transition after 5 years
– When 70, he will start monthly income withdrawals.
– At that time, equity portion can be partly reduced.
– Shift required portion into debt and liquid funds.
– Debt will provide systematic withdrawal every month.
– Equity can still remain partly to beat inflation.
– This combination keeps income steady and sustainable.

» Withdrawal strategy
– Use systematic withdrawal plan from debt funds.
– This creates regular monthly income like pension.
– Withdraw only what is needed for expenses.
– Leave balance invested to keep growing.
– Rebalance annually between equity and debt.
– This ensures money lasts longer without stress.

» Taxation aspect
– FD interest is taxed every year at full slab rate.
– That reduces post-tax return sharply.
– Debt fund gains are taxed only on redemption.
– Tax rate is as per income slab.
– Equity fund LTCG above Rs 1.25 lakh taxed at 12.5%.
– Equity STCG taxed at 20%.
– With careful withdrawal, tax can be managed better than FD.

» Emergency fund
– Even in retirement, emergencies can arise.
– Medical costs, family support or urgent repairs may come.
– At least Rs 2 to 3 lakh should be kept liquid always.
– This avoids breaking long-term investments.
– Liquid funds or sweep FDs are good for this.

» Health and insurance
– At 65, health insurance is very critical.
– If he already has policy, keep renewing.
– If no cover, consider senior citizen health insurance.
– Medical inflation is very high in India.
– Insurance will protect corpus from getting drained suddenly.

» Inflation risk over future
– Rs 20 lakh looks sufficient today.
– But inflation will reduce its value.
– Cost of living doubles in about 12 years.
– Equity allocation ensures money grows faster than inflation.
– This helps him get higher monthly payout after 5 years.

» Discipline and review
– Retirement planning is not one-time activity.
– Market cycles will change every few years.
– Portfolio must be reviewed yearly.
– Certified Financial Planner can do this with proper strategy.
– Discipline ensures long life of the retirement corpus.

» Psychological comfort
– Having a clear monthly income stream gives peace.
– It removes worry about future expenses.
– Knowing that money is structured for growth and income builds confidence.
– This is as important as financial returns.

» Estate planning
– At his age, planning inheritance is also vital.
– A clear will should be made.
– Nominations in all investments should be updated.
– This ensures smooth transfer of wealth later.
– It avoids disputes among family members.

» Possible allocation structure
– For first 5 years: keep part in equity funds for growth.
– Rest in debt funds for safety.
– Small portion in liquid for emergencies.
– After 5 years: shift some equity into debt for income.
– Use systematic withdrawal plan for monthly payout.
– Continue small equity allocation for inflation protection.

» Finally
– Your uncle has done very well to save Rs 20 lakh.
– He also has time window of 5 years before needing income.
– This allows growth, then stable withdrawals later.
– FD alone will reduce returns due to tax and inflation.
– Balanced mix of equity, debt and liquid is the right choice.
– Avoid index and direct funds, as active management gives better stability.
– Regular guidance from Certified Financial Planner will help manage risks.
– With discipline, this Rs 20 lakh can support his retirement smoothly.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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