The worries of post-retirement life are many and the most important is to ensure a regular cash flow to meet the day-to-day expenses. Those who are totally averse to risk opt for debt instruments such as FD (fixed deposit), Post Office Monthly Income Scheme (MIS) and some such deposits. The highest interest rate in this basket is offered by the Senior Citizen Savings Scheme (SCSS) – 8.2%.
However, those who can take a small measure of calculated risk, can think of SWP (Systematic Withdrawal Plan), says investment experts. SWP can be done with mutual fund schemes. The basic principle is to invest a lump sum in mutual fund schemes that will increase the amount steadily and the investor withdraws an amount regularly to fund his/her expenses.
Capital erosion not an option
According to investment strategists, erosion of the capital obtained at retirement is not an option. One should also remember that contrary to the popular perception, MFs offer the option of investing in debt, gold, silver etc apart from equities to finetune the scheme with the degree of risk that a retiree wishes to undertake.
“But the trick is to extract an amount of money that is not more than the appreciation that the scheme delivers in a year. If the amount withdrawn is more than the growth in the capital, erosion of capital will take place,” said Nilanjan Dey, investment advisor and director, Wishlist Capital.
Spread out in four-five funds
Dey says if a person gets Rs 1.5 crore from different sources, he/she can invest one-third of it in debt instruments such as SCSS which offers 8.2%. The rest of the money can be spread out in four to five funds. “If a person invests right after retirement at the age of 60, he/she will have at least 15 years of life to look forward to. In that case, one can opt for equity-oriented funds. But if the risk appetite is a bit lower, one can opt for one equity, and the rest can be hybrid and balanced fund,” said Dey.
“In India we see many investors withdrawing between 7-9% of the amount in the funds every year. One should remember that less frequent the withdrawal, the more profitable it is for the investor,” Dey added.
Mutual Fund investment: If carefully planned, the Systematic Withdrawal Plan or SWP is an useful tool to use as a source of regular cash flow like a pension. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
