/How should I invest my retirment savings to receive monthly income of Rs 1 lakh?

How should I invest my retirment savings to receive monthly income of Rs 1 lakh?

I will be retiring in December 2021. My current savings of around Rs 40 lakh is invested in mutual funds. My retiral benefits would be Rs 60 lakh. How do I invest to earn a monthly return of Rs 1 lakh per month from January 2022?

Naveen Kukreja, CEO and Co-Founder, Paisabazaar.com replies, “Assuming you want to withdraw a fixed amount each month from your post-retirement corpus, a part of it has to be invested in low-risk fixed income instruments like ultra-short duration debt funds to ensure steady income and capital protection. You can invest the rest in equities to achieve long-term growth and ensure your retirement corpus lasts longer. Prefer monthly withdrawals of Rs 80,000 as withdrawing Rs 1 lakh will increase the risk of exhausting your retirement corpus within your lifetime. Invest your retirement benefits in low-risk ultra-short duration debt fund(s) and invest your existing savings of Rs 40 lakh in large-cap mutual fund(s). Your investment in ultra short debt funds will comfortably last for eight years after making monthly withdrawals of Rs 80,000 at an assumed annualised return of 7%. Meanwhile, your investment in large-cap funds will grow to about Rs 99 lakh in eight years assuming an annualised return of 12%. Withdraw Rs 60 lakh from equity fund corpus at the end of around eight years to replenish your debt fund corpus and make monthly withdrawals Rs 80,000 for another eight years. Continue with this cycle as and when you need to replenish your debt corpus. This should almost eliminate the risk of running out of your retirement corpus in your lifetime.”

My 46-year-old relative holds a contractual post in a government organisation but has zero retirement savings. What is the best recourse for him to get a decent retirement income? Is NPS an option?

Prableen Bajpai, Founder FinFix® Research & Analytics replies, “NPS is a low-cost investment option. It offers two approaches to invest: active choice and auto choice, which pre-define the proportion between different assets as per age. However, on reaching the age of superannuation, at least 40% of the accumulated pension corpus has to be used to purchase an annuity. The remaining funds can be withdrawn as a lump sum. Public Provident Fund (PPF) can also be considered for the debt part of his portfolio. It has a tenure of 15 years, which will broadly coincide with his retirement age. This gives the flexibility to withdraw all the savings after 15 years or extend it further. PPF can be supplemented with equity mutual funds, such as an index fund and a mid-cap fund. He should avoid insurance-linked pension plans. Any loans should be gradually cleared to set aside a bigger sum as savings. He should look at building a contingency fund and buying a health insurance plan.”

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