Don't outlive your retirement savings due to the Covid crash

After his retirement last year, Mr Gupta invested his retirement corpus of Rs 1 crore equally in equity and fixed income. He invested Rs 15 lakh each in Senior Citizen Savings Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY), which helped him get a guaranteed monthly income of Rs 20,000. His remaining fixed-income portion is invested in a combination of liquid and short-duration funds, from where he has set up a monthly withdrawal of Rs 30,000 to meet his expenditure. Unfortunately, a massive fall of about 22 per cent in equities during March end and early April made him extremely anxious and worried that he may outlive his savings (see the graphic 'Then and now'). Here is what he should do now. Do not redeem your equity investments Given the prevailing situation, Mr Gupta may be tempted to withdraw his equity investments to safeguard the capital left. However, doing so would be a big mistake as that would make his notional losses permanent. One must appreciate that equities are volatile in nature and can give you nasty surprises o

This article was originally published on July 16, 2020.