I am 44 years old with take home salary of Rs 100,000 per month. Which pension scheme will be best for me to invest? How much do I have to invest for pension of Rs 50,000 or Rs 30, 000 per month from 65 years onwards? Kindly guide me.

Ans: To achieve a pension of Rs 25,000 per month at the age of 58, you need to start investing in retirement-focused mutual funds or pension plans. Here's a suggested approach:
Equity Mutual Funds for Growth: Since you have a long investment horizon until retirement, consider investing a significant portion of your savings in equity mutual funds. These funds have the potential to offer higher returns over the long term, helping you build a substantial corpus.

Diversification: Opt for a diversified portfolio of equity funds across large-cap, mid-cap, and small-cap segments to spread out risk. Additionally, allocate a portion of your investments to debt funds to provide stability and reduce overall portfolio volatility.

Systematic Investment Plan (SIP): Start a SIP in selected equity mutual funds to regularly invest a fixed amount every month. SIPs help in rupee cost averaging and can smoothen out the impact of market volatility over time.

Asset Allocation: As you approach retirement, gradually shift your asset allocation from equity to debt funds to reduce risk and preserve capital. This can be done gradually over several years to minimize the impact on your portfolio.

Systematic Withdrawal Plan (SWP): Once you retire, consider setting up a SWP from your mutual fund investments to generate a regular income stream. Determine the amount you need for monthly expenses and set up SWPs accordingly from debt or balanced funds.

Review and Adjust: Regularly review your investment portfolio and withdrawal strategy to ensure it aligns with your financial goals, risk tolerance, and changing life circumstances. Adjust your asset allocation and SWP amount as needed based on market conditions and your retirement income needs.

Consult a Financial Advisor: Consider consulting with a financial advisor who can help you design a customized investment plan tailored to your specific requirements and risk profile. They can also provide guidance on tax-efficient withdrawal strategies during retirement.

By following this approach, you can benefit from the growth potential of equity investments during your working years while ensuring a steady income stream through SWP during retirement, helping you beat inflation and meet your financial goals.

Ans: There are various types of pension plans available in the market like those offered by Insurance companies, National Pension Scheme and Mutual Funds.

Insurance offered pension plans could be Immediate Annuity Plan, Guaranteed Period Annuity Plan, Life annuity plan etc which generally offer assured income to you. However, the returns are very low and high taxability make them quite expensive. I feel that the lure of assured income does not fully compensate you for what you lose in the bargain.

I feel that using Mutual Funds to create retirement income is much better alternative since it gives you far greater flexibility of investment, withdrawal, changing course any time as per your requirements and very high tax-efficiency.

Before choosing an option for your retirement, I suggest you to consult with a good financial advisor for the best suitable advice.

Ans: Your 25L will roughly become 60 lakhs at retirement & you can expect roughly 30K a month as withdrawals from the corpus which will also allow your corpus to grow. All of the above is assuming you are investing correctly

Ans: By investing 65 lakh you can get around 32500/- monthly

Ans: Your aspiration for a pension scheme is commendable, and it's wise to plan for your future financial security at an early age. Considering your age and investment horizon of 12 years, let's explore suitable options to achieve your goal.

Given your preference for a monthly pension of Rs. 20,000, you would need to accumulate a significant corpus over the investment period to ensure a sustainable income stream post-retirement.

While traditional pension plans and annuities offer guaranteed income, they may not provide optimal returns considering inflation and taxation. Additionally, they often lack flexibility and liquidity.

Instead, you may consider investing in a combination of mutual funds and other growth-oriented assets to build a substantial corpus over time. Equity-oriented mutual funds have historically delivered higher returns compared to traditional investment avenues, making them suitable for long-term wealth creation.

You can allocate a portion of your monthly investment towards equity mutual funds, which offer the potential for capital appreciation over the long term. To mitigate risk, diversify your portfolio across large-cap, mid-cap, and multi-cap funds based on your risk tolerance and investment objectives.

Simultaneously, consider investing in debt mutual funds or fixed-income instruments to provide stability and generate regular income post-retirement. These investments can serve as a source of passive income to supplement your pension.

Moreover, systematic investment planning (SIP) allows you to invest a fixed amount regularly, ensuring discipline and consistency in your investment approach. By staying invested over the long term and leveraging the power of compounding, you can potentially achieve your desired pension goal.

However, it's crucial to periodically review your investment strategy and make necessary adjustments based on changing market conditions and your evolving financial goals.

In conclusion, by adopting a diversified investment approach tailored to your risk profile and investment horizon, you can work towards realizing your goal of a monthly pension of Rs. 20,000. Consider consulting with a Certified Financial Planner for personalized advice and guidance to optimize your investment strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in