Financial planning with retirement money for senior citizens

Q & A Forum › Category: Portfolio Review › Financial planning with retirement money for senior citizens

shweta asked 10 years ago

My parents are retired(60), have house, there is pension,FD and health insurance. Apart from this there is 12 lakhs, which I suggested they invest in mutual funds(it is their first time). So that they can have vacations abroad( 4-5 vacations). The portfolio is so that they have cash flow every 3-4 years. Birla SL MIP II wealth 25(g)-(direct) 3L withdraw after 3-4 years HDFC liquid fund to HDFC balanced fund-(direct)3L- STP for 20 months- withdraw after-5-8 years Birla SL cash plus to birla SL Frontline equity(direct)-3L STP for 20 months withdraw after 10-12 years Mirae asset India opportunity fund-(direct) 3L STP for 20 months withdrawal after 10-12 years.

3 Answers

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Sreekanth Staff answered 10 years ago

Hi, May i know if their pension income is sufficient to manage their living expenses? What is the expected goal amount? (Vacation)? You may also suggest them to maintain certain amount (depending on their monthly expenses) as an Emergency fund in Cash + Liquid Fund + Arbitrage Fund. Read: http://www.relakhs.com/best-debt-mutual-funds-india-top-debt-funds/ http://www.relakhs.com/best-arbitrage-funds-returns/ http://www.relakhs.com/list-of-best-investment-options-schemes-in-india/ All the four funds are good ones!

shweta replied 10 years ago

Thank you very much for your reply. I must tell you, you are doing a great service by teaching a layman about this. it has helped a lot to understand.Their pension amount is sufficient with the FD interest. There is an emergency fund also. The 4 vacation cost is 10L,8L,4L,4L presently, I don’t know how much it will change in the coming 10 years. So you think putting the money 3L each in these 4 funds is the right choice, given the situation?

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Sreekanth Staff answered 10 years ago

Hi, If they are not dependent on this corpus investment, the strategy looks ok to me. Keep tracking the performance of the Portfolio. You may suggest them to switch to debt or FDs, one year before the goal target year (depending on the market conditions or accumulated amount). Also, kindly note that STPs are treated as normal redemptions, so be aware of the tax implications. Kindly read: http://www.relakhs.com/calculate-future-value-investments/ http://www.relakhs.com/mutual-funds-taxation-rules-capital-gains-tax-rates-on-mfs-fy-201516/

shweta replied 10 years ago

Thank you for pointing out the tax implications, I was not aware of that. My mom gets a pension of 23k per month and dad 19 k per month. To avoid tax, what do you suggest, how do they transfer the money to equity? How much can be transferred in one year, on each of their names?

Sreekanth Staff replied 10 years ago

Hi..There is no limit as such on the quantum of money that can be transferred. If you opt for STPs from a debt fund to Equity funds then can’t escape the tax implications.

shweta replied 10 years ago

Thank you, for patiently clearing my doubts. I have another confusion,If you can kindly clear this, in the profile I have given mirae asset opportunity , would you suggest this or ICICI value discovery better? This is for the period of 10-12 years.

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Sreekanth Staff answered 10 years ago

Hi,
The two of them belong to different fund categories. Mirae Asset India Opportunities Fund is a Large cap oriented fund, whereas ICICI value discovery is a Multi-cap or Diversified fund.
For >10 year horizon, you may consider ICICI Fund.
Read:
http://www.relakhs.com/mutual-fund-categories-market-capitalization-large-cap-vs-mid-cap-vs-small-cap-funds/

http://www.relakhs.com/best-mutual-fund-scheme-risk-ratios/