Retirement corpus investment

POSTED BY Akshay Surve ON July 16, 2013 12:57 pm COMMENTS (6)

My mom has retired and is a senior citizen. Her retirement corpus is around 50L. I wanted to check with the group here to find out the best options to investment this corpus with the following goals:
1. Monthly income of ~15K
2. Investing the rest of the amount in safe instruments for growth.

P.S: ~3L-5L of emergency fund has been kept aside already and is not included in this amount.

For now; I have done the following:
a. Invested 15L in SCSS (post office) at 9.3% p.a. quaterly interest which could give around ~11.5K monthly
b. I have also invested 5L in Fixed deposits at 9.5%p.a. for 3 years which amount to 3.9K monthly.

So, overall I think the ~15K monthly would be met and this was the best of my knowledge. I would like to get a quick opinion on ([a] and [b]) to know if I haven’t goofed up big time.

Now for the part [2] which is to invest the rest of the money in safe instruments. I would like to know what are the possible options. Here is what I’m thinking:
– Fixed deposits are at a high; and I don’t see any other instruments giving better returns at low or no risk. Does it make sense to lock on to these for the next ~5 years?
– Are co-operative banks a safe bet or is it best to stick to PSUs? What is safer co-operative vs private banks?
– Can you recommend some banks whose fixed deposits could yield better returns?
– I have been reading of bonds / corporate fixed deposits – what is a better way to invest in them? Also, is it a good time to invest in a particular category of MFs?
– Does it make sense to invest in NSC or KVP considering they are capped at ~8.4 for now?

6 replies on this article “Retirement corpus investment”

  1. Dear Akshay, what about her health insurance?



  2. Akshay Surve says:

    Any other contrarian opinion?

  3. Ramesh says:

    My suggestion:
    1. Keep the emergency fund of 3L-5L. Use / replenish it as per need.
    2. You have already put 20L in SSC and FD and she would get 15k p.m. from that.
    3. This leaves 30L.
    4. She needs around 1.8L (15*12) per year and with a 50L corpus, it should be doable (around 4%). And by being conservative, you may not be able to continue the value of the corpus to last eternally, but still quite a number of years.
    5. Put 15L in Franklin Prima Plus / Franklin Blue Chip fund (a total of 30% of the corpus into equities). and Rest 15L in Templeton Income Opportunities / Income Builder fund. Direct options would be much much better. And only growth options (no dividend options are needed).

    This way total would be 70% in debt instruments and 30% in equity, which is quite conservative in my opinion.

    6. Later, every year or 2 years, you can rebalance by keeping the two of those funds in equal value and remove whatever amount is required. Eg, say from next year, you will need an extra 20k per year (considering an inflation of 10%), then you can opt for a one time withdrawal of that amount from those funds.

    And in future, personally I would put those 5L of FD money into those 2 funds also.

    hope this is clear to you.

    1. Akshay Surve says:

      Thanks Ramesh. This helps a lot.

  4. Ramesh says:

    What have you thought about the Inflation part? I cannot see anything related to that in your query?
    Just in case you do not have the data, govt provided data for CPI has been around the 10% mark. This in simple terms means the purchasing power parity of 15k p.m. this year will mean it will work out to be 13.5k p.m. (even though the nominal amount will remain at 15k). Can you understand that part?

    Continue this for all the next years (but obviously at differing inflation values).

    1. Akshay Surve says:

      Hi Ramesh,

      You are right; that has not been factored in for now. But there is where I need help. How can I use the rest of the funds to factor it in and also grow this going forward?

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