Retirees' business ventures should not be taxing

I will turn 60 and retire by the end of the year. My children are settled. My wife is the only dependent. I have two houses that I plan to leave for my children. I will get Rs 20 lakh as retirement benefit. Besides my houses in Ernakulum, I have land worth Rs 30 lakh. My monthly expenses are Rs 20,000, apart from medical expenses. We may live for 20 years. How much corpus should I have for a decent life? If my income is not sufficient, is it better to work or start a business? I have floater Mediclaim for Rs 5 lakh to take care of hospitalisation expenses.Jacob

Constructing a retirement portfolio for individuals on the verge of retirement is a difficult task and it is daunting for those without adequate retirement corpus. At least in your case you have some assets to liquidate to meet a shortfall.

Your retirement benefits will not be sufficient to meet your monthly needs.If you deploy Rs 20 lakh at 9 per cent, you would earn Rs 1.8 lakh per annum or just Rs 15,000 a month as interest.

The options that are available to you are to either go for employment or to liquidate your land. In the event of selling your land, deploy the fund in deposits and you can manage your monthly needs till 70 by making judicious investment of the surplus earned in the first few years.

After 70, you have to opt for reverse mortgage of your property with a bank. This will provide you a loan structured into regular payments until your death. The amount of loan depends on the age of the borrower, value of the property and interest rates. The advantage is that you can continue to stay in the property.

For the retired, starting a business may be a good idea provided they have seed capital and the ability to withstand losses. Besides that, any business needs a few years to stabilise.

There are a few options whereby you can start business with almost no capital. One of them is HR consultancy, provided you have good contacts.

I am 54 years old and will be retiring after six years. My job is transferrable and I am now posted in Mumbai. My wife is a home-maker. I have built a house in Jaipur by taking a housing loan from my office. I have two children: my daughter is married and settled and my son is doing MBA (final year). I have a monthly surplus of Rs 10,000 for investment. I am always afraid of taking risks as far as investment is concerned. Please suggest the safest investment plan so that my wife and I can have some security during old age while making provisions for other social responsibilities that may arise periodically. Considering our current healthy life, we may live for 20-25 years. After retirement, as per my employment contract I am eligible for a pension of around Rs 20,000. Do you think my pension will be sufficient to meet my monthly requirements or do I need to save more? I also need to spend a few lakhs for my son's marriage. My accumulated PF balance is Rs 13 lakh and I have a deposit for Rs 3 lakh. — R.K. Singh

With your pension and accumulated balance of PF, you can manage your monthly needs without any major shortfall till you reach 70. You have stated that the you are eligible for pension with variable DA. In most cases, an increase in DA may not match the rise in inflation. For instance, let us assume that your monthly expenses are Rs 20,000 at retirement. The expense will be Rs 39,000 when you turn 70 and Rs 55,000 at 75, assuming 7 per cent inflation. However, the actual increase in DA could be lower.

To balance your monthly needs, deploy the PF judiciously to meet any shortfall. Assuming that your current PF balance grows at 8.5 per cent for the next six years, at your retirement it will be Rs 21 lakh. We presume your monthly PF contribution as Rs 6,000. With interest the PF could grow to Rs 4.5 lakh. At your retirement if you deploy Rs 25.5 lakh at 7 per cent, you will earn an annual interest of Rs 1.75 lakh. This can be used to meet the shortfall in your later years.

As you are not interested taking risk on your investment, deploy Rs 8,000 in RD till your retirement. As part of tax planning, withdraw the amount in the financial year after your retirement. . As you have six more years to retire, we suggest you invest Rs 2,000 in a balanced mutual fund, say HDFC Prudence, for the next six years.

After retirement, it is better to have adequate medical cover. In most cases employer medical support to the retiree is limited. So, it is better to enhance the medical cover limit to at least Rs 5 lakh. For your son's marriage, utilise the fixed deposits.

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