Latest financial planning article in The Hindu Business Line

I am 60 and have retired. My wife, a homemaker, is 54 I have a 27-year-old son who earns Rs 50,000 per month. We do not want to be dependent on our son’s income . I do not get any pension.

I have a fixed deposit with monthly interest option. I recently paid the last premium of a life insurance policy, which will mature in 2020. We have not taken any medical insurance policy as it is expensive.

My son will get married soon. We are worried about our future as cost of living is rising, given the current inflation. Please advise as to how to allocate the existing fund in a safe way to generate good returns. Should I invest a portion in mutual fund debt and equity schemes?

– G.Chandrashekar

It is always a challenge to meet the monthly needs if you don’t have a retirement plan.

In your case your investment income is just marginally higher than your monthly needs. But if inflation continues to hover around seven per cent, the current annual expenses of Rs 1.8 lakh will be Rs 3.8 lakh by the time you turn 71.

That will be the starting point of shortfall. If you invest Rs 34 lakh, that you would get when your insurance policy matures, at 9 per cent you will receive Rs 3.06 lakh annually. Even after adding your wife’s pension it will total up to Rs 3.6 lakh only.

If you need to beat inflation you ought to invest in equity schemes. But in your case even after fully deploying all the financial assets you have a shortfall. In such a situation equity is not an ideal investment.

Moreover, at 71, venturing into equity for high return is not advisable. So with whatever surplus is left with you currently invest in equity through SIPs for bridging future shortfall.

Regarding investing in debt schemes of mutual funds, it is not a prudent thing to do.

Since you have no income and no tax liability its better to stick to fixed deposits.

Now, you can opt for reverse mortgage at 71 or sell the flat and invest the proceeds to earn interest at that time.

Regarding medical insurance, it is highly risky to avoid taking a health cover just because the premiums are high.

For a medical cover of Rs 4 lakh, your annual premium outgo will be Rs 20,000 and it will help you to protect your retirement corpus as you need not dip into your kitty for medical expenses.

(The author is CEO, myassetsconsolidation.com)

source : http://www.thehindubusinessline.com/money-wise/financial-planning/article4935527.ece