How to derive income in retirement

Let's assume you've made all the right moves and are now sitting on a princely sum to see you through your silver years. Your priority now is setting up a distribution plan that gives you a regular income after retirement. Now, an income-generating portfolio, as you well know, will need to have a very different asset allocation from a growth-oriented portfolio. Therefore, as you transition from the accumulation phase of retirement planning to the distribution phase, you need to make a shift in your asset allocation away from equities towards debt options. It is best to start on this project four-five years ahead of retirement. After taking all this trouble to accumulate a sizeable retirement corpus, you don't want a sudden bear market to batter your portfolio right when you turn 60. Imagine a 2008-like situation, where the market was down over 50 per cent in a single year! The best way to avoid such last-minute shockers is to initiate a phased shift in your asset allocation from an equity-heavy portfolio to a more balanced one, starting five years ahead of your retirement date. While rejigging your portfolio, where do you invest the money? Let's illustrate with the case of Sathya, who has a Rs 3 crore corpus. Her corpus is 25 times her annual expenses of Rs 12 lakh. She needs to invest it in three buckets. Emergency fund Financial planners advise having six months' living expenses in an emergency fund during your

This article was originally published on February 11, 2020.