How can I plan my retirement effectively considering that he is 57 years old and is about to retire after a dedicated career?
My parents own land of value ₹250 million (they intend to sell), the two properties are worth approximately ₹90 million, a LIC policy with expected mature value ₹3.5 million, mutual fund investment ₹1.2 million and other assets worth it ₹60,000-70,000. Over the next 2-3 years, we intend to sell our current property and buy 300 million apartments for the price ₹17,500. My parents spend monthly ₹45-55k, but I want to make sure they are capable of traveling and enjoying their retirement as a full-time one. Our goal is to generate stable monthly income ₹1.2 million, while increasing the portfolio to beat inflation. What are your suggestions for organising investments, optimizing asset allocations, and establishing a reliable source of income for retirement, including any advice on financial products, real estate decisions or effective tax strategies?
– Name detained upon request
Congratulations on your proactive retirement. It’s great to see that children plan not only for their parents’ safety, but also for their happiness, including travel and a quality lifestyle. Let’s structure carefully:
Fund availability and passive income plan
Over the years, your parents have built a solid asset base. Once they sell the land (value ₹25 million) and property (value ₹9 million), extra assets worth it ₹700,000, considering the expiration of its LIC policy ( ₹3.5 million) and mutual fund investment ( ₹Grow to around 1.2 million ₹With a compound annual growth rate of 12% in 3 years, its total asset value will appear ₹39,800 million.
However, some important inferences must be made:
Purchase a new 3BHK: ₹17,500
Home interior and settings: ₹2.5 million (it is important to consider this)
Emergency Fund: ₹500,000 (will be kept in fixed deposits or working capital)
Health Insurance: If you haven’t arrived yet, make sure you have a comprehensive health insurance policy (at least ₹Both have 2 million float covers, house rental flexibility and disease-free sub-limits)
After these fees, your net investment corpus will appear ₹930 million
Monthly income needs to be associated with corpus
Your goal is monthly income ₹1.2 million, perfect for providing their current lifestyle and ideal goals like travel.
However, considering 6% of lifestyle inflation and life expectancy up to 90 years, the required corpus needs to be maintained ₹1.2 million per month, inflated as time goes by, about ₹25,700.
Since the available investment corpus is ₹19,300 million, the income you can actually generate in the ₹90,000 per month after tax, after inflation adjusted.
Therefore, from ₹90,000 monthly withdrawals are gradually made every few years, gradually consistent with inflation.
Return slightly through asset allocation to beat inflation and ensure corpus life.
Asset allocation strategy
To achieve a balanced approach, growth, income generation and capital protection can be consistent, and multi-barrel investment strategies can be very effective. This is a malfunction:
Bucket 1: ₹42,60,000 debt mutual funds, providing stability and liquidity, with a return of 7% after tax. It is best for short-term needs.
Bucket 2: ₹47,41,000 of the conservative hybrid mutual funds combine debt and medium-risk equity with a return of 8.5%, aiming to grow at steady revenue.
Bucket 3: ₹74,21,000 hybrid and large mutual funds, with a balanced risk profile and expected return of 10%, targeting medium to long-term growth.
Bucket 4: ₹Multi-stock Equity Fund 28,78,000 aims to grow high in risky market cap ranges with an estimated return of 14%.
This strategy spreads risk while aligning investments with different financial goals.
The assumed average tax rate is 15% of all expected returns. It is important to develop a multi-asset investment strategy for your retirement plan, where for the first five years you invest in an asset class that generates 7% after tax. You can combine guaranteed income plans, such as senior savings plans and debt mutual funds. One can contribute ₹Up to 1.5 million in SCSS, so your parents invest together ₹3 million for the next five years, earning 8.2% per year ₹246,000 and balance ₹Debt of 1.554 million MFS.
The problem with SCSS is that it is not inflation-adjusted, and the tax benefits only account for 50,000 of the interest earned. You can avoid investing completely or investing ₹After transferring the proceeds to a conservative hybrid fund in your father’s name and after five years of lockdown, for 1.5 million.
one. Savings Plan for the Elderly (SCSS) and Debt Mutual Fund (after-tax target 7%):
invest ₹Rs 1.5 lakh locked for five years and the return rate is 8.2% (taxable interest).
This is appropriate because safety is the most important thing in the early retirement year. If you choose SCSS, you will have to withdraw funds from Years 3 and 4, because ₹The 2.7 million investment debt MF will redeem the inflation-adjusted three years. Choose a debt mutual fund with high-quality sovereignty and AAA bonds.
b. Conservative Hybrid Mutual Fund:
Invest Bucket 2 funds in conservative hybrid mutual funds or dynamic asset allocation funds that invest in equity and derivatives over 35% or more to obtain a return of approximately 8.5-9% after tax.
c. Active mixed and large mutual funds:
Invest in aggressive hybrid and large equity mutual funds for higher returns (10% after tax) with an equity exposure of 8-9 years. And transfer the corpus to bucket 1 or 2 to allow the system to withdraw from the corpus with the security of the accumulated corpus.
d. Multi-share mutual fund:
Putting the remaining balance into multi-share MF portfolios in large, medium and small-cap stake categories will ensure growth over the next 20 years with an after-tax return of approximately 14%. The available corpus is then transferred to a safer MF category (Bucket 1 or 2) to smooth out the system evacuation.
Systematic withdrawal plan
Develop a systematic withdrawal plan (SWP) from a debt mutual fund and withdraw the recurring fees for their bank accounts monthly.
Rebalancing every 3 – 5 years: Move funds from growth buckets (3 or 4) to safer buckets (1 or 2) as they approach the demand schedule.
This ensures that their corpus grows at a rate that exceeds inflation.
Other suggestions
Create an emergency fund: ₹The minimum amount is 500,000, and it is best to park in a liquid mutual fund or FD in a sweep.
This ensures liquidity without disrupting long-term investments.
Comprehensive Health Insurance: If you haven’t purchased it, buy an elderly health insurance plan now. Premiums may be higher, but if any health problems arise, you must have health insurance to prevent high medical expenses.
Will and Real Estate Planning: Encourage your parents to develop their will in the future without any legal issues in order to easily allocate assets.
Lifestyle: Plan a separate “travel fund” with any bonus, maturity gain or surplus gain. It ensures that travel does not interfere with the main corpus.
You are already on the right path. Just by structuring investments and reviewing them every few years, you can ensure your parents live a safe, comfortable and happy retirement full of travel, comfort and dignity.
Nehal Mota, Co-founder and CEO of Finnovate
