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How to get a regular income after retirement?

To begin with, you should start shifting money from your equity investment to safer avenues to like bank deposits, liquid schemes, etc at least two years before your retirement

I am a regular reader of your magazine. I am trying to find an answer to a question: I will keep investing in equity mutual funds (growth option) till the time I plan to retire. When the time comes to retire, how to use this investment portfolio to get a regular income? What are the factors to consider? Should I shift my MF investments to dividend option so that all income comes as dividend? What are the recommended options?
- Bhupendra

You haven't offered any personal details, so we are offering you a general advice. To begin with, you should start shifting money from your equity investment to safer avenues to like bank deposits, liquid schemes, etc at least two years before your retirement. This is to ensure that a sudden volatility in the stock market do not have an adverse impact on your retirement plans. The amount of money you should shift will depend on your financial situation. The general rule is that you should have enough money stashed away in safer avenues to take care of your expenses for the next three years.

The next step is to ensure a regular income if you don't have a pension from your employer. You must invest in government backed schemes like Senior Citizens Savings Scheme, Post Office Monthly Income Scheme, etc, to secure a regular income. You cannot bank on dividends from mutual funds for this purpose. This is because equity mutual funds need not declare dividends regularly, especially when the market is in a bad phase. It is always better to withdraw money from your equity mutual funds in a phased manner to supplement your income rather than opting for a dividend.

You can supplement your regular income by deploying your money in slightly riskier options available with mutual funds like arbitrage funds, debt mutual funds, monthly income plans, balanced funds, etc. Always consider taxation on withdrawal while choosing an option. For example, withdrawals from arbitrage funds and equity-oriented balanced schemes are tax-free after a year, whereas debt investments qualify for long-term capital gains tax with indexation benefit only after three years. You should also consider your risk profile while choosing an investment option.

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