VR Logo

Retirement Dilemma

Adequately preparing yourself for retirement is a crucial necessity

I am a senior citizen and want to invest Rs 50,000 in a tax saving fund. Which fund should I invest in? Should I invest in one fund, or go for more?

- Suresh

If you look at an investment period of three years, then you will find that the difference between the returns of the best fund and an average fund is very little. If you are investing consistently, then it is necessary for you to distribute your money. 

If it is a one-time investment, without involving too much paper work, then one fund would be sufficient.

I will retire in eight years and, as per my calculations, I would need Rs 40,000 per month thereafter. How should I go about achieving that?

- Prakash

You will have your accumulated savings and investments, if any, to fall back on. Hopefully, you would have your Provident Fund and other superannuation benefits intact. 

But you have less-than-ideal time to prepare, as eight years may not be good enough, to conjure up the sum you seek. You need to sit with a financial planner who can tell you in a detailed manner as to whether you will be getting pension and sort out other nitty-gritties. If there is a huge gap then you need to take some extra risk with your investments. This just might mean raising your equity allocation substantially and hope that you get lucky with some good investment. 

I am 76 years old and have been investing in equity since the age of 25 years. About 85 per cent of my portfolio is equity. Should I diversify?

- Parikshit

It is a function of scale and what you have done, in normal context, is fine, but it may not be the best approach in your framework. Turning conservative in old age is not necessarily the general idea. Normally, this principle is followed so that people don’t become rash.

However, you should have a fixed income allocation. At the same time, you should have a fixed income investment to the extent that you need income or if you need an emergency fund in case you fall sick. But beyond that, if you want your successor to have a superior inflation-adjusted accumulation, then for your income and all your needs, have a sufficient buffer to service your needs sufficiently. Those investments would beget fixed income. Beyond that for a person like you, there is a reason to be reasonably exposed to equity, if you do not need the money for consumption purposes.

Post Your Query