How to structure your retirement portfolio

Is your retirement round the corner? How to allocate your money among various assets to generate a decent return maintain a healthy lifestyle as long as you are alive. As a thumb rule, retirees should have an asset allocation which is based on their needs and not age.
The person should have some equity allocation to take care of higher life expectancy to counter inflation since not all money will be required in the coming 1-5 years. One should thus invest the income required in the initial 5-6 years in government senior citizens savings schemes, fixed deposit, arbitrage funds & debt funds, with the remaining amount being allocated to equity-oriented mutual funds. After every five years, reallocation of equity to debt can be done in order to generate income and rebalance one’s portfolio.
*In Mutual funds debt/hybrid funds one should go for a growth option & opt for a SWP option for regular option withdrawing ~ 6-7% of your portfolio per year (1.5% every quarter or 0.5% every month) to save on taxes. Dividend payment on debt funds is taxable in the hands of the fund house.
An ideal portfolio at the time of retirement should look something like this:

 

Product
Category
Maximum Investment
Expected Return
Lock in Period
Premature Withdrawal
Taxable
Ideal Allocation
Senior Citizen Savings Scheme (SCSS)
Debt
1500000
8.5%
5 years
1 year
Yes
15%
Bank Fixed Deposit (Senior Citizen)
Debt
No Limit
6.7%-7.2%
Varies as per tenure
Anytime
Yes
10%
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Debt
750000
8%
10 years
Medical Illness
Yes
10% after SCSS quota is invested
Corporate FD (HDFC, PNBHF etc)
Debt
No Limit
7.5%-8%
Varies 1-3 years
Anytime
Yes
10% after SCSS quota is invested
Debt MF*
Debt
No Limit
8%-8.5%
Anytime
Anytime
LTCG after 3 years
25%
Hybrid MF*
MIP, Equity Savings, Balanced Fund
No Limit
9%-10%
Anytime
Anytime
LTCG after -MIP 3 yrs, rest tax free-1 yr)
20%
Equity MF-Growth
Equity
No Limit
14%-16%
Anytime
Anytime
Tax free after 1 year
10%

Retirement Planning – Invest Early, Invest Wisely

How much should one invest for a comfortable retirement today?

Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named 'The Tortoise' 

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