Investment plan

retirement investment plan: I will receive Rs 66 lakh as retirement benefits. How should I invest it to earn 7% per year?

In each edition of ET Wealth, our panel of experts answer questions related to any aspect of personal finance. If you have a question, send it to us immediately at [email protected].

I am 58 years old and I will be retiring next month. I will receive Rs 66 lakh in retirement benefits. My wife earns Rs 20,000 per month and we have a 20 year old son who is studying. We have our own house. We have jointly invested around Rs 44 lakh in post programs, PPF, annuity programs and RBI bonds. I also own around 700 shares of RIL. Our monthly expenses are around Rs 55,000. How should I invest my money to earn around 7% per year?

Naveen Kukreja, CEO and Co-Founder of, responds: It would be difficult to generate returns of 7% per annum from term deposits or short / low / ultra short debt funds. I suggest you buy equity exposure for your retirement benefits to generate higher returns. First, let’s manage your investments to meet your monthly expenses. Invest Rs 23 lakh in a lump sum in short term debt funds. Assuming an annualized return of 5%, this would last over six years making monthly withdrawals of Rs 35,000. For the remaining corpus, consider the following steps. Stay invested in your existing fixed income investments of Rs 44 lakh. This will ensure a 35-50% debt / fixed income split in your overall portfolio. As the investment exposure to a single script can be very risky, I recommend that you sell your RIL shares valued at around Rs 14 lakh.

Invest the remaining Rs 43 lakh of your pension benefits and the proceeds from the sale of your RIL shares in equity funds via year-long SIPs. Assuming an annualized return of 10%, your equity body of Rs 57 lakh should reach around Rs 91 lakh in six years. Once you are on the verge of hitting that six year mark, take Rs 23 lakh out of your principal and invest it in short term debt funds for five years. Keep repeating this cycle every five years. Invest in direct plans from one of these short term funds – ICICI Prudential Short Term and HDFC Short Term Debt Fund – to build your debt portfolio.

Invest in Tata Index Sensex or HDFC Index Sensex Fund direct plans; and Parag Parikh Flexi Cap or Mirae Asset Emerging Bluechip Fund in the proportion of 50:50 for the creation of your equity portfolio.

Invest in Mirae Asset Tax Saver and / or Axis Long Term Equity Fund direct plans via SIPs if you need to save tax.

I am 35 years old and I earn Rs 1.35 lakh per month. I have a house and a car, all without a loan. I have a 5 year old child for whom I invest 20,000 rupees per month via SIPs in equity mutual funds since the day he was born. I want to have at least Rs 5-6 crore for my retirement and vacation. I have a Rs 1 crore forward plan and a Rs 5 lakh family floating hedge. How much do I have to invest to create this corpus?

Prableen Bajpai, Founder of FinFix® Research & Analytics, responds: The amount of money you will need in retirement depends on your current spending and factors such as inflation, return expectations and longevity. Assuming a current monthly expenditure of Rs 50,000, inflation of 6%, returns of 11% CAGR and post-retirement returns of 5%, a corpus close to Rs 8 crore must be built to last until the age 85. This will require a monthly investment of around Rs 50,000. You can decide the final amount based on precise inputs as well as your other investment allowances such as EPF. You can build a portfolio with a mix of active and passive strategies: index funds (large caps), flexi-cap funds, mid caps and an allocation of up to 20% outside of India. Your existing SIP of Rs 20,000 will accumulate around Rs 1.3 crore by the time your son enters college assuming a CAGR of 11%. Although not all relevant information is available, based on a broader analysis given your age, income, and future expenses such as your child’s education, you appear to be “underinsured” and must therefore be reassessed.

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