I am retiring next year and will receive about Rs 1 crore from EPF and gratuity. My stock portfolio is worth Rs 1.3 crore and mutual fund portfolio is worth Rs 25 lakh. The MF break-up is as follows: small caps (10%), index funds (30%), flexi & multi caps (15%), balanced advantage (10%), ELSS (10%) and large caps (25%). My PPF corpus is about Rs 25 lakh. I live in my own house and have family mediclaim worth Rs 20 lakh. How can I generate a monthly income of Rs 1.5 lakh from January 2025? Anupam Guha, Head, Private Wealth Management, ICICI Securities:
I am 53 years old. I intend to retire at 55 with a Rs 2 crore corpus. My current monthly expenses are Rs 50,000. I live in my own house and have no liabilities. Which instruments can help me live comfortably with a low risk appetite? Rushabh Desai, Founder, Rupee With Rushabh Investment Services:
I am 40 years old and pay Rs 35,000 as rent in Mumbai. I have two properties worth Rs 2 crore in Kolkata. My parents live in one house worth Rs 1.3 crore, and the other one generates Rs 14,000 as monthly rent. My salary is about Rs 2.25 lakh per month. I have Rs 27 lakh in EPF and `7 lakh in FDs. My monthly expenditure is about Rs 1.75 lakh. My goals are to buy a house in Mumbai in three years and build a corpus for retirement at 60 years. Rushabh Desai, Founder, Rupee With Rushabh Investment Services:
I’m 47 years old and plan to retire at 50. I have no debt, sufficient medical coverage, Rs 3 crore life insurance and emergency funds for six months. I have two daughters, aged 19 and 17, and their education is secured. I have Rs 2 crore in the EPF, NPS, mutual funds and PPF, and property worth Rs 2 crore that gives a rent of Rs 50,000 a month. My expenses are Rs 1.5 lakh a month. Can I retire with this corpus? Adhil Shetty, CEO, BankBazaar:
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As a financial expert with a deep understanding of various investment instruments and retirement planning, let's dissect the concepts and advice provided in the article.
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Retirement Corpus Management for Monthly Income:
- Anupam Guha suggests a conservative approach for managing the retirement corpus. He recommends allocating the EPF and gratuity to long-term debt mutual funds like HDFC Long Duration Debt Fund and Nippon India Lakshya Nivesh for predictable income.
- To mitigate equity exposure and volatility, he advises moving a significant portion of direct equity to hybrid funds. Balanced Advantage Funds (BAF) and Multi-Asset Funds (MAF) are suggested, with specific options like ICICI Prudential Multi Asset Fund and ICICI Balanced Advantage Fund.
- An 18-month expense coverage from the PF balance is proposed, followed by setting up a Systematic Withdrawal Plan (SWP) from long-term debt funds for a 6% payout. Any shortfall can be managed with redemption from BAF and MAF.
- The portfolio realignment is recommended every 4-5 years, targeting returns of 9-10% for sustaining retired life.
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Retirement Planning with Low Risk Appetite:
- Rushabh Desai addresses a person planning to retire at 55 with a Rs 2 crore corpus and a monthly expense of Rs 50,000.
- Considering a life expectancy of 80 years, he suggests that theoretically, the corpus might be enough, but practical aspects and economic scenarios could make it risky.
- Options include increasing the retirement corpus, pushing back retirement age, raising risk appetite to invest in equity (20-30%), or reducing expenses.
- For low-risk debt products, investments in high credit quality corporate bonds and PSU funds are recommended. On the equity side, investment in Sensex and/or Nifty 500 index funds and dynamic asset allocation funds (hybrid) is suggested.
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Wealth and Expense Management for Future Goals:
- The third scenario involves a 40-year-old individual paying Rs 35,000 as rent in Mumbai with properties in Kolkata and specific financial goals.
- Rushabh Desai advises specifying the budget for a future house in Mumbai and estimating a retirement corpus factoring in inflation.
- Monthly SIP in equity mutual funds (20-30% of income) and an annual top-up based on salary increments is recommended. The FD corpus can be invested in debt mutual funds for diversification.
- The advice also includes evaluating the potential of the property generating Rs 14,000 in monthly rent, either liquidating it for better long-term compounding in equity mutual funds or using it for buying a house in Mumbai.
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Early Retirement Planning with Diversified Assets:
- Adhil Shetty responds to a 47-year-old planning to retire at 50 with Rs 2 crore in EPF, NPS, mutual funds, PPF, and property worth Rs 2 crore generating a monthly rent of Rs 50,000.
- The expert suggests having sufficient insurance, separate investments for children's education, and no liabilities as positive factors.
- A corpus roughly 25 times annual expenses at retirement is recommended. With a mix of debt and equity and an annual return of 10%, a 6% step-up in withdrawal each year can provide inflation-proof returns.
- The rental income is factored in, and the corpus is expected to support around 25 years. Staying invested in equity for at least a decade after retirement is suggested for additional security, with an average return of 15%.
In summary, these financial experts emphasize the importance of a balanced and diversified investment approach, considering individual risk appetites, future goals, and economic scenarios in retirement planning.