I am 49+ I have 13 lacs MF, 65 lacs FD, MIS 9 LACS , FLAT Worth 80 Lacs, Gold worth 60 lacs, ppf worth 7 lacs , pf worth 28 Lacs , shares worth 7.5 lacs, insurance worth 30 lacs. , nps worth 3 lacs. Need monthly income of 50000 pm by 60. Pls advise way forward after retirement of 60.
Ans: You have a diversified range of investments, which is commendable. Let's break down your current holdings to get a clearer picture:
Mutual Funds: Rs 13 lakhs
Fixed Deposits: Rs 65 lakhs
Monthly Income Scheme: Rs 9 lakhs
Flat Worth: Rs 80 lakhs
Gold: Rs 60 lakhs
Public Provident Fund: Rs 7 lakhs
Provident Fund: Rs 28 lakhs
Shares: Rs 7.5 lakhs
Insurance: Rs 30 lakhs
National Pension System: Rs 3 lakhs
You need a monthly income of Rs 50,000 after you retire at 60. Let's explore how to achieve this goal.
Evaluating Your Current Investments
Mutual Funds:
Mutual funds are a great way to grow wealth over time. They provide diversification and professional management. However, consider switching from direct funds to regular funds. Regular funds offer better service and guidance through a Certified Financial Planner (CFP).
Fixed Deposits:
Fixed deposits are safe but offer lower returns. As you near retirement, safety becomes important. However, you need to balance safety with growth. Too much in fixed deposits can erode your purchasing power due to inflation.
Monthly Income Scheme (MIS):
The Monthly Income Scheme offers regular income but limited growth. It’s a safe option but does not keep pace with inflation.
Flat Worth:
Your flat is a significant asset. While it provides value, it's not a liquid asset. It can be considered for future use, like selling or renting, to generate income post-retirement.
Gold:
Gold is a good hedge against inflation. It's a safe investment, but it doesn't provide regular income. Consider holding gold as part of your diversified portfolio.
Public Provident Fund (PPF):
PPF is a safe, long-term investment. It provides tax benefits and steady returns. Continue contributing to it as it forms a stable part of your retirement corpus.
Provident Fund (PF):
Provident Fund is a reliable retirement savings tool. It provides steady growth and is a safe investment. Ensure you keep track of your contributions and interest earned.
Shares:
Shares offer growth potential but come with higher risk. Keep a portion of your portfolio in shares for growth. However, as you approach retirement, gradually reduce exposure to high-risk stocks.
Insurance:
You have insurance worth Rs 30 lakhs. Ensure you have adequate coverage for health and life insurance. Reassess your insurance needs periodically.
National Pension System (NPS):
NPS is a good retirement savings option. It offers tax benefits and steady returns. Continue contributing to NPS for long-term growth.
Building a Retirement Strategy
Estimate Your Retirement Corpus:
You need a clear estimate of your retirement corpus. Given your requirement of Rs 50,000 per month, calculate your annual need and factor in inflation. This will give you a target corpus to aim for.
Asset Allocation:
Diversify your investments across different asset classes. A balanced mix of equity, debt, and alternative investments can provide growth and stability.
Equity:
Allocate a portion to equity for growth. Consider actively managed mutual funds for better returns. Actively managed funds can outperform index funds due to professional management and market insights.
Debt:
Debt investments provide stability. Use fixed deposits, PPF, and debt mutual funds. They offer regular income and lower risk.
Gold:
Keep gold as a part of your portfolio. It’s a good hedge against inflation and economic uncertainty.
Income Generation:
Post-retirement, you need to generate a steady income. Here are some options:
Systematic Withdrawal Plan (SWP):
Use SWP from your mutual funds to get regular income. It allows you to withdraw a fixed amount periodically.
Senior Citizen Savings Scheme (SCSS):
SCSS is a government-backed scheme offering regular income. It’s a safe option for retirees.
Monthly Income Plans (MIPs):
MIPs offer regular income with moderate risk. They invest in a mix of equity and debt.
Health Insurance:
Ensure you have adequate health insurance. Medical expenses can drain your savings quickly. Opt for a comprehensive family floater plan.
Emergency Fund:
Maintain an emergency fund. It should cover at least 6-12 months of expenses. Keep it in liquid assets for easy access.
Implementing the Strategy
Regular Reviews:
Review your portfolio regularly. Assess the performance of your investments and make adjustments as needed. A Certified Financial Planner can help you with this.
Rebalance Your Portfolio:
Rebalance your portfolio periodically. Ensure it aligns with your risk tolerance and retirement goals.
Reduce Debt:
If you have any outstanding loans, aim to pay them off before retirement. Reducing debt lowers your financial burden.
Tax Planning:
Plan your taxes efficiently. Use tax-saving instruments like PPF, NPS, and tax-saving mutual funds. They provide tax benefits and help grow your corpus.
Exploring Alternatives to Direct Funds
Disadvantages of Direct Funds:
Direct funds might seem attractive due to lower expense ratios. However, they lack the guidance of a Certified Financial Planner. This can lead to uninformed decisions and potential losses.
Benefits of Regular Funds:
Regular funds offer professional advice and service. Certified Financial Planners provide tailored investment strategies. They help you navigate market complexities and make informed decisions.
Avoiding Index Funds
Disadvantages of Index Funds:
Index funds replicate the market index. They offer average returns and lack flexibility. In volatile markets, they may not perform well.
Benefits of Actively Managed Funds:
Actively managed funds aim to outperform the market. They offer higher returns through expert management. Fund managers can adjust portfolios based on market conditions, offering better performance.
Final Insights
Planning for retirement requires a balanced approach. You need to ensure growth, stability, and regular income. Your current portfolio is diverse and well-structured.
Here are some key steps to move forward:
Diversify Investments:
Maintain a balanced mix of equity, debt, and alternative investments.
Generate Regular Income:
Use SWP, SCSS, and MIPs for steady income post-retirement.
Ensure Health Coverage:
Have comprehensive health insurance for unexpected medical expenses.
Maintain an Emergency Fund:
Keep liquid assets to cover 6-12 months of expenses.
Plan for Taxes:
Use tax-saving instruments to grow your corpus and reduce tax liability.
Seek Professional Guidance:
Consult a Certified Financial Planner for personalized advice and regular portfolio reviews.
By following these steps, you can achieve your goal of a comfortable retirement with a monthly income of Rs 50,000.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
