Retirement Portfolio

[KoolSIM]

Hello all,

My dad will retire soon and is expected to receive around 35 lakhs in hand. I wanted advice regarding how my dad should invest this money in various different instruments so that his life under retirement is secure?

Please advise. What kind of products should I look into for him?

Thanks!

 

[rkkarnani]

Hello all,

My dad will retire soon and is expected to receive around 35 lakhs in hand. I wanted advice regarding how my dad should invest this money in various different instruments so that his life under retirement is secure?

Please advise. What kind of products should I look into for him?

Thanks!

I would prefer a mixed portfolio of Bank FD's with monthly / quarterly interest payments and Long term high interest paying NCD or Bonds!! Personally would avoid investing in Stocks!!

 

[2021]

I would prefer a mixed portfolio of Bank FD's with monthly / quarterly interest payments and Long term high interest paying NCD or Bonds!! Personally would avoid investing in Stocks!!

NCD/Pvt Bonds/Deposits are risky and should not be used by retired persons. They do not guarantee returns and there are cases of defaults by many NCD/Pvt deposits claiming high rates in past.

A bank FD upto 30-40% of retirement amount is 1st thing your dad should do. And make sure you open account in banks where there are no pre mature penalty like IDBI or dhanlaxmi bank. Both are paying most compitetive rate of interest. Make sure you deposit amount in several denomination and frequency and not 1 lumpsum amount. Suppose if bank rates further go up your FD with least duration can be renewed and it is seen banks are more flexible in hiking short term rates often than longer terms. Also if you need 10-20% in between for medical or any important expense and if your FD are divided into parts, you can withdraw FD which is going to mature 1st instead of maturing whole lumpsum amount. By this you'll save large chunk of deposits of long duration which has higher interest from getting disolved during emergency.

Sencondly, put 20% of amount in Balanced mutual funds like HDFC Prudence or HDFC Balanced. In long term they provide you returns safer than equity funds having uoto 30-35% of funds in several fixed deposits and rest amount in equity. Since you have secured a good 40% in Fixed deposit and you are getting 30% more secure deposits in Balanced funds, you can risk 70% of allocated 60% in equity by now.

Thirdly, buy some Gold ETFs upto 20% of fund when prices are down say below 22,000 per 10 grams. Having real gold increases your expense of lockers and no jeweller gives 100% return on prevailing price on pure gold like biscuits or gold coins. Nationalised banks gold coin attract TDS and other taxes on purcharse and redemption! So ETFs are advisible.

Use 2% sum on buying a non-ulip linked insurance in dad's name. LIC and most nationalised banks insurances have schemes for people upto 65 years which cover them till age of 75-80. In case of unforseen death your family is protected financially by giving just 2% of one time premium amount!

The rest around 20% can be used in buying land, prefer B-class towns where you can get a 1000 sqft land at 6-7 lacs. These towns will grow now at fast rate and getting a land at 600 per sqft in such city is not difficult. Make sure land is in some buliders township project or diversion done by developer and not just some peice of land. Builders/Develpers land are secure for long term and since most people buy this land for investments chances of encroachment is almost nill as it will be developed by seller 1st and society later.

Lastly, don't be greedy for returns. If someone promises you anything beyond current interest rates that person is in high chances fraud. Avoid share market however lucrative returns looks or market makes bottom.

 

[rkkarnani]

Thanks for a detailed reply 2021, would help a lot of members here!!

 

[AW10]

Nice reply 2021.
But what about having some fun.. He slogged all his life and would have made compromised many pleasure for the post retirement.. IMO, he should have enjoy the life too... how about spending (rather blowing off) 5 to 10% to celebrate retirement..

 

[vishal412]

Nice thought AW 10.

You are absolutely correct he should now look into spending some for his own. Rest he should put in such in such avenues from where he can get some monthly incomes without taking too much risks, MIPs can be a good bet.

 

[drsambu123]

Hello all,

My dad will retire soon and is expected to receive around 35 lakhs in hand. I wanted advice regarding how my dad should invest this money in various different instruments so that his life under retirement is secure?

Please advise. What kind of products should I look into for him?

Thanks!

Apart from insurance and investment plans, Health insurance policy is must.. Nowa days hospital bills are heavy and destroy our plans if some disease suddenly develops.

 

[KoolSIM]

Thanks everyone!!

I have a fairly good knowledge about Equity mutual funds. Some information about what kind of debt funds or fixed deposits (2021 suggested IDBI & Dhanlaxmi) I should explore more would enhance my knowledge here. I have heard MIPs, but am not sure how it works. The last I remember, MIPs need not even pay on a monthly basis.

Also it would be great help if someone has experience about insurance plans for my dad. Health/Accident.......? Do insurance companies give life insurance to senior citizens? I'm not sure.

Thanks for your responses everyone! Please continue as this would be helpful to many forum participants who maybe in my place!

 

[2021]

For a retired person, FMP or MIP is not at all advisible. Both FMP or MIP do not give sure returns and these may vary in various funds. The reason of such plans sold so much is tax savings as matuirty on Fixed deposit attracts 10.3% TDS above 10,000 interest whereas FMP/MIP comes with dividend distribution tax if FMP/MIP selected is dividend option or capital gain tax if these are equity. BUT a senior citizen has to fill a form 15H on maturity and avoid any tax cuts on fixed deposits. Also rates for senior citizen is given higher upto half a percent than normal rates. So when you have freedom to save full tax without any risk that prevail in funds, why look for anything other than FDs?!

Health Insurance for senior citizen is costly and in most cases requires health cheak up. Starting from (if assumed age is 60) 15000 annum for a 5 lacs sum insured by max bupa or iffco tokyo sum can go upto 50000 charged by reliance or bharti general. In fine prints you will find a 17,000 do not provide whole benefits like critical illness whereas a 50k annum comes with bundle of offers like hosiptal cash benefit, post hospitalisation etc but too has some other necessary benefits missing like daily cash or nursing or donor expense. You can check policybazaar site for several available plans. Some has fixed tenure upto 65 years that provides most benefits while some has till 80 years renew offers but don't give many incentives like daily encashments or critical illness. Generally any health insurance above 35 is costly and comes with strings attached. And yes, you can take life insurance but premium is very high. Online term insurance are cheaper and better but here to it comes with clause of claims upto 75 years of age. If your dad exceeds 75 years all your premium which comes around 35,000 to 50,000 per annum for 10 lacs goes waste and you don't get any returns.

Instead of MIPs you can put a certain amount of FD say 25% of all FD amount as sweep-in. In this you'll get interest earned on deposit direct in bank a/c and you principle amount shall remain same for tanure and maturity. All banks provide sweep-in a/cs and it's way cheaper, without any tax and gives guaranteed returns.

Hope this helps. If you have any query feel free to ask. Also you can get quotes for insurance, accident/health/term from policybazaar site or by calling several insurance companies toll free numbers.

 

[shilpaks7]

outlook money lists the following in the 9.25% and above for FDs. for senior citizens it would be higher. please note-this is for the 1-2 years bracket:

andra bank
axis bank
central bank of india
dena bank
idbi bank
indian bank
indian overseas bank
ing vysya
karur vysya
south indian bank
syndicate bank
UCo bank
union bank of india