Mutual Funds

Your Financial Plan

Suresh Parthasarathy | Updated on January 17, 2018 Published on August 21, 2016

I work in a nationalised bank. I retire in a month. After retirement, as a former employee, I will get an extra 1 per cent interest and as a senior citizen an additional 0.25 per cent. I plan to travel once in six months. I have a health policy for ₹10 lakh. Please suggest investment plans that will fetch 9 per cent return.

BLN Swamy

Running an EMI, post retirement, is not desirable. Also, you have no life cover to protect the liability. With a narrow income-expense gap, meeting unexpected expenses is a challenge. Also, when interest rates are heading lower, it will be difficult to meet your needs entirely with bank deposits.

So, allocate 60:40 in debt and equity mutual fund. If you invest the entire equity portion in a balanced fund, your overall exposure to debt investments will be 74 per cent which can earn 10 per cent return.

If you invest ₹24 lakh in your bank and earn 8.25 per cent return, your interest income will be ₹1.98 lakh. Invest the balance ₹16 lakh in a balanced fund and withdraw 0.67 per cent monthly and it will account for ₹10,600. In some years, if the market delivers abnormal returns, move profits to a liquid fund and through systematic transfer plan move the money back to a balanced fund.

Including your pension, your total monthly income will be ₹53,000 against total expenses of ₹51,800. Once your loan is closed you will be left with surplus. Since you have home loan repayment and health insurance premium your taxable income will be lower than the marginal income slab. So, you will not have any tax liability on your income. Since you have not disclosed the home loan interest it is not clear whether commuting your pension is advantageous. If you commute pension and if the commutation benefits come close to the outstanding loan amount, close the loan. For the shortfall, utilise the retirement benefits.

The writer is a SEBI-registered investment advisor and founder,

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