I retired at 60 with a corpus of $4.3 million rupees and my monthly expenses are $2 lakh. With a life expectancy of 85 years, how should I invest to maintain a stable income while preserving my corpus? I’m considering real estate, high dividend stocks, and systematic withdrawal plans (SWP). How can I diversify to balance growth, risk and capital protection? How much should go into safe instruments like fixed deposits (FDs) or bonds, and how much should you allocate to growth assets like stocks and real estate for long-term sustainability?
—Name withheld upon request
Investing for post-retirement is a very important exercise and can work better if you plan for it. At this stage, we have to take into account the real growth rate of different assets and portfolios whose returns are adjusted for inflation. At the same time, investing money in different asset classes can help you generate better returns and diversify.
Typically, the overall corpus can be invested in multiple avenues and withdrawals can be planned from them over 25 years. If we assume inflation of 6% per year for the post-retirement stage and divide the investment into three categories (debt, hybrid and equity), then an investment of $3.65 crore will take care of your post-retirement goal.
The breakdown is as follows: Invest $50 lakh in debt instruments to cover withdrawals for the first two years. Assign $1 crore to hybrid mutual funds (MFs) for withdrawals over the next two years and the last four years (years 21 to 25), for a total of six years. For the remaining 18 years, invest $2.25 crore equity instruments to generate inflation-beating returns for your withdrawals.
The assumed returns to calculate the investment amount are 5% debt, 7% hybrid and 10.50% equity. Inflation must be considered as $2 lakh will be withdrawn per month in year 1 with annual inflation of 6%. $3.37 lakhs.
With this increase in the withdrawal amount, the invested corpus should grow at a faster rate. Therefore, a good amount of capital investment will be necessary. Taking into account that you have an existing corpus of $4.3 crores, it should be feasible to invest in these deposits for regular withdrawals.
Investing in real estate will require a larger amount of your corpus and at the same time you will also have limited liquidity. The growth rate of the real estate sector is also subjective and depends on multiple factors.
Therefore, you can consider all these points before diversifying into real estate. Ideally outside $4.3 million rupees, you need $3.65 crore to take care of their post-retirement withdrawals in view of annual inflation of 6%.
you will still have $75 lakh, therefore, a certain amount can be invested in a fixed deposit from a contingency perspective, and you can also consider investing in a senior citizen savings plan, which will help you maintain a part of the debt. For equity investments, you can consider investing through equity mutual funds.
—Harshad Chetanwala, Co-Founder, MyWealthGrowth.com
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