My father will retire in October from central government service after working for 41 years. He would be getting a corpus of 40 Lakhs when retiring and a regular monthly pension of 25000 going forward. How should the lump-sum corpus be invested for a tax efficient returns.
7 Answers
Hi,
May I know the expected/ required monthly living expenses by your father? Let me know if he has any dependents? Is he entirely dependent on the income generated by this Corpus (Rs 40 Lakh) + Pension income?
Does he has any other source of income?
Kindly go through below articles;
http://www.relakhs.com/retirement-planning-calculator-3-easy-steps/
http://www.relakhs.com/list-of-best-investment-options-schemes-in-india/
Hi Sreekanth,
My father has no dependents. His pension income would be 25K monthly and his expenses would be 35K monthly. Apart from pension, he does not have any other source of income. We are looking for a tax efficient investment for his retirement corpus which can give him a regular income apart from his pension.
Please advice.
Hi,
The options he can consider are;
- Senior Citizen Savings Scheme. (income is quarterly payable)
- Post office MIS.
- A small portion in non-cumulative monthly payment option of Secured NCDs. (in all the three options, interest income is taxable).
- A small portion of corpus in Mutual Fund MIP - Growth fund with Systematic Withdrawal Plan.
- If his income tax rate falls in 20-30 per cent tax bracket, tax-efficient debt funds can be more beneficial than FDs. So, he can consider investing in Dynamic debt funds with Growth-SWP option.
Hi,
Besides the above investment plan, suggest him to maintain Emergency fund of atleast say 3 months living expenses in the form of Cash + FD + in a Liquid fund.
Suggest him to take a Senior citizen health insurance plan (if he does not have one).
Kindly read:
http://www.relakhs.com/health-insurance-parents-senior-citizens/
Thanks Sreekanth. Any indicative percentage of allocating the corpus across the different instruments suggested by you
Hi,
The maximum amounts that are allowed under Sr.C.S.S & PO MIS are Rs 15 lakh and Rs 4.5 lakh (single a/c) respectively.
If he deposits Rs 19 lakh in these two schemes, assuming inflation at 8% and returns at 8%, he can get around Rs 8,000 per month for next 20 years. Kindly note that the interest income is taxable.
The remaining corpus amount can be invested in other suggested options so that the returns can be slightly better. This has been suggested based on the fact that he has no dependents and he receives certain pension income.
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