Greeting To Our Readers! 

Retirement Wealth, simply the corpus we create during our working days, only to make the expenses secured while in our retirement days! We plan we save, we invest and we accumulate for retirement days.

Experts believe if the individual's planning is disciplined, then chances are high that he retire accumulating a good lump-sum as their retirement wealth. However, they say the disciplined approach is not only necessary while accumulating retirement wealth but, is also important post-retirement!

Discipline with our money habits is something we need even post-retirement. Without this, the accumulated lump sum can get spent a lot sooner than expected.

Now point to discuss is how to create a disciplined approach for money habits post-retirement! The good news is that there is more than one way to do this.

Let us see what are the ways……….

Shifting The Wealth Created To Low-risk Investments…………

Ideally, the bulk of your retirement funds should be in long-term investments like equity. They can be either direct or through managed funds.

As you get closer to retirement, shift some of this accumulated pool to low-risk, transparent and liquid securities like debt and money market mutual funds or even bank deposits.

Firstly, estimate your monthly income requirements. Calculate what you will need at this rate for the next 60 months or five years and withdraw that amount to shift to a low-risk investment.

If you are moving this to bank deposits, then creating a savings cum fixed deposit account or sweep account may be useful. If you choose to invest in debt mutual funds, have a selection of liquid and short-term income funds.

Keep the money you need for the next two years in liquid funds and the rest in short-term income funds with an average maturity of not more than 2 years. While liquid funds are not really meant for two-year parking of money, this choice caters to the need for high safety.

Set up an automated monthly withdrawal from the liquid fund for the next two years for your monthly requirement.

Any shifts out of mutual funds, including monthly withdrawals, will be subject to long-term capital gains tax.

Setting Up A Systematic Withdrawal From Equity………..

The idea of shifting investments from long-term portfolios made with equity assets into debt assets (partially or otherwise) is to ensure one thing. That one thing is that the funds you need in the next three to five years are secure and at minimum risk.

However, this shift is required only if your equity assets are less than adequate at the time of retirement. Less than adequate can be qualified by doing a stress test and implement as described below.

Take the value of your entire portfolio and reduce it by 60%.

Then divide the remaining amount to see how many months’ worth of expenses you can derive from this corpus.

Lastly, reduce the estimated amount for additional expenses of travel and emergencies. Then, see how many months the corpus can cater to. Is this remaining corpus is sufficient for the next 5-6 years’ expenses? If yes, then you can continue to remain invested in equity.

Create a systematic withdrawal plan for the amount you need each month from this corpus.

Use that as your regular income. To reduce some risk, you can move the bulk of the investment into large-cap or index-based funds.

This is still a high-risk retirement income strategy. This is perhaps best considered if there is a supplementary pension income from some other source or rental income coming in addition.

Let Us Sum Up………..

Retirement is a time of change and new beginnings; you mustn’t take your financial life for granted. Plan ahead and ensure that regular income is secured beforehand.

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For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).