Hi Srikanth,
At the outset, let me congratulate you on the completion of 4 years and I've been rigorously following your blogs from the past one year.
I would like to seek your advice on my dad's retirement corpus of around 20lacs and before I lay out a set of questions, here are the few updates on his financial planning.
A) As he retired from the bank, his major source of income will be pension and I presume he will not be needing these funds unless some financial emergency arrives.
B) I advised him to invest 1.5Lacs in PPF as it will take care of his annual tax commitment plus he will be earning a better ROI than FD or other banking instruments. Totally risk-free and no IT liability. After 3- 4 years you can close it too. No lump sum deposit
C) Out of 20 lacs, I will require almost 7-8lacs after 2 years as I purchased an under construction property and need some funds for upfront payment.
D) He is insured under Army Insurance plan as he served his 13 years in defense and then switched gears to the banking sector. He is a diabetic and cardiac patient and I've taken 3lacs of medical insurance from my current employer.
Based on the above details, please advise on the following questions.
- What do you advise on the remaining retirement corpus 12 (20-8lac home payment) which he will not be required for at least 3-4 years?
- As he is a Sr. Citizen, are there any good govt schemes where he can be benefited under tax planning?
- He has never invested in MF nor in equities, hence we both are naive to the equity market world.
- Since my father has affiliation with the bank he is more inclined towards bank FD as knows the security factor the best, but considering skyrocketing inflation we must tap the best available avenues to not only beat inflation but ensure its growth.
2 Answers
Dear Sachin,
Thank you for following my blog posts!
1 - PPF has a lock-in period of 15 years. You have mentioned that it can be closed in 3 to 4 years?? About which product are you referring to??
2 - The corpus amount of Rs 7-8 lakh can be saved in a Bank FD or Ultra Short term debt fund (if you are ok with taking slight risk) for next 2 years.
3 - In case, he opts for mutual funds, may I know his investment objectives and would this be for wealth accumulation only?
Suggest you to go through this article :
Lump sum Investment options for Retirees/Senior Citizens | Where to invest my Retiral benefits to get Regular Income?
1 -I will take my word back where I mentioned that it can be withdrawn after 3 years. Let me rephrase that partial amount can be removed in case of a new house loan or medical emergency.
Maybe I can ask him to opt for Post Office SCSS where the interest rate has been retained same at 8.3%. and PPF has 7.6.
2 – If we invest the partial amount in a bank FD then it will be taxable and again the return earned on the principal will be pretty less. What is your view on P2P lending where we can get a better interest than an FD with a slight risk?
3 – For the remaining corpus, his main investment objective is only for wealth accumulation where he will not require money unless some need arrives.
Hi,
1 - Sr.Citizen Savings Scheme & Pradhan Mantri Vaya Vandana Yojana (pension oriented scheme) are decent options.
2 - You may consider Short Term Debt funds and can take the indexation benefit after holding the units for 3+ years. If you understand the risks associated with P2P, you may consider it. But, do not aim for unrealistic returns.
Kindly read :
What is Peer to Peer Lending? How does it work? | RBI’s latest Guidelines on P2P Lending Platforms
3 - He may consider Hybrid Funds (Balanced funds) & MIP funds. He must be ready to accept the volatility, as returns are not guaranteed with MFs (equity/debt).
Ex : HDFC Hybrid Equity Fund, SBI MIP Floater, Birla MIP II Wealth 25 plan etc.,
Kindly read :
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