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How can a retiree get a 10% post-tax return on his investments?

Dhirendra Kumar describes how a retiree can generate regular income

How can a senior citizen generate a post-tax return of 10 per cent on his investments?
- Bhushan Sachdeva

If you're in the 30 per cent tax bracket and want to generate a post-tax return of 10 per cent, you need to earn a gross return close to 15 per cent. If you fall under the 20 per cent tax bracket, you require a lesser return and so on. At the very least, even if you want a 10 per cent return (if you are not in the taxable bracket), the point is, what investment avenue will generate a 10 per cent return or more?

No fixed income alternative will generate 10 per cent. There are two-three fixed income options for retired people, but they will earn you just around 7 per cent. So, if you need 10 per cent return, you need to buy into equity quite substantially. Now, how much equity? Try as little as possible. It could be 20-40 per cent or as high as 60 per cent, but it entirely depends on your scale. If you have Rs 50 lakh capital and need a 10 per cent return, i.e., Rs 5 lakh per annum, you need to rely entirely on equity. This problem will be solved only if you have a little more capital than what you need, let's say a crore of rupees when you need Rs 5 lakh per annum. This way, you require a return of 5 per cent, so your equity allocation can be comparatively less. Things start getting easier if you have even more corpus because it can support even higher income.

I want to give one more context here. The rate of return like nine, 10 or 11 per cent is very relative numbers, and it is all in line with the inflation. So, you have to understand that if inflation goes down, these returns will also go down. And if that happens, how will you manage if your definite requirement is 10 per cent return. So, I would say that the only sensible choice is to have some equity allocation (try and manage with least as possible) and try to build as much corpus as you can while you are in your accumulation phase. This is the only way out.

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