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May 06

Your Financial Plan – Retirement

I am retiring this month. My wife 56, currently employed, is eligible for pension. She will quit her job after June. My son is 26. I own a house and need to support my parents as well. How should I deploy my retirement fund? I wish to leave good assets to my son. I have a medical cover from my employer until my lifetime.

Raguraman

Build equity portfolio for your son’s future.

Solutions: You will be comfortable throughout life, as a major part of your monthly expenses are taken care by your wife’s pension. If you wish to leave estate for your son, break your retirement benefits into two components. One, for your consumption and the other for your son.

Do an asset allocation of 65:35 in debt and equity. Since you have no pension, invest retirement benefits of 85 lakh in fixed instruments at an interest of 7 per cent. Invest 8 lakh in your wife’s name. You will receive post-tax return of 50,700. Use 15,000 to meet monthly expenses and set aside the balance for yearly vacation.

Invest 51 lakh mainly in large-cap, multi-cap and mid-cap funds in the ratio of 20:45:35 to earn 12 per cent return. If there is any shortfall, book profits in your equity portfolio. You can thus fulfill your desire of visiting places and leaving an estate for your son. Since most of the funds are in debt, you don’t need a separate emergency fund.

The writer is registered investment advisor and founder myassetsconsolidation.com.

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