Retirement: How to make a retirement plan in Rs 50 lakh? Where to invest for regular and increasing income every year

How to Plan for Retirement with Rs 50 Lakh Corpus: A corpus of Rs 50 lakh is not a big amount to spend the entire life comfortably after retirement. But if properly planned and invested, then even this much fund can be used to arrange a decent regular income. While planning for retirement, it is important to keep in mind that with time, prices and your monthly expenses will increase. Therefore, your regular income after retirement should also keep increasing accordingly. It is also important that you do not have any debt burden after retirement.

Invest by making the right strategy

To generate a regular and ever-increasing income from a deposit of Rs 50 lakh, you will have to invest your funds in different assets properly and with a better strategy. While doing this, it is important to keep these things in mind:

Estimate your financial needs

To make a retirement plan, you must first estimate your financial needs. First add your monthly expenses. It is important to add every kind of expense including daily expenses, expenses on medicines and treatment. Once you have an estimate of monthly expenses, you can calculate your annual expenditure by multiplying it by 12. Add at least 10 percent of contingency expenses to it.

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Calculate additional income

If you are going to get any extra income from rent or any other source after retirement, then calculate it as well. This will help you in knowing how much of your post-retirement expenses you need to arrange from your investments.

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Create a diversified portfolio for investment

To properly invest your savings of Rs 50 lakh, you will have to create a diversified portfolio. For this, you will have to invest in both equity and fixed income assets while maintaining a balance. For this, you can also divide your investments in this way:

• You should invest half of your fund i.e. Rs 25 lakh in equity through mutual funds.
• Index funds should have an adequate place in your diversified equity investment portfolio as they are low-cost and are known to deliver stable returns over the long term.
• Apart from index funds, you can also invest in large-cap, mid-cap and small-cap funds.
• You should invest the remaining half of the fund of Rs 50 lakh, i.e. Rs 25 lakh in fixed income assets.
• For this, you can invest in Senior Citizen Savings Scheme (SCSS), Public Provident Fund and Senior Citizens Fixed Deposit of banks.
• Apart from these, you can also invest some amount in short term debt funds, which will give you the facility of liquidity along with moderate returns.

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Do not withdraw more than 6% of your amount in a year

You can withdraw 5 to 6 percent of your corpus every year to meet your monthly expenses. For a retirement fund of Rs 50 lakh, this amount can be Rs 2.5 to 3 lakh per year. By withdrawing money at this rate, you will continue to get regular income and the principal amount will also keep increasing. Investment in equity can be very helpful in increasing your capital, which will also help you deal with the impact of inflation rising every year.

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Keep rebalancing your portfolio

Keep rebalancing your portfolio at least once a year. If due to rapid growth in equity investment, its share in the entire portfolio increases to more than 50 percent, then take out some money from there and invest in fixed income assets. This will not only maintain the balance of your investment, but will also give you the benefit of selling during the market boom and buying at lower levels. Apart from this, the portfolio can also be rebalanced if needed according to the changes in interest rates and market environment. For this, you can also take the help of a professional investment advisor.

Understand calculation with example

Suppose you invested your retirement fund of Rs 50 lakh in 2014 in equity and fixed income assets in a 50:50 ratio. If you withdraw 6 per cent of the amount every year for your expenses, then its calculation year-wise can be something like this:

Year 1: Withdraw Rs 3 lakh (6% of Rs 50 lakh)

Second year: Portfolio grows to Rs 52 lakh. Annual withdrawal Rs 3.12 lakh

Third year: Portfolio grows to Rs 55 lakh. Annual withdrawal is Rs 3.30 lakh

Fourth year: Portfolio grows to Rs 58 lakh. Annual withdrawal is Rs 3.48 lakh

After 10 years: Portfolio grows to Rs 75 lakh, annual withdrawal increases to Rs 4.5 lakh.

In this calculation, most of the growth in the portfolio is assumed to come from 50% of the amount invested in equity, which should be Rs 37.5 lakh in a total corpus of Rs 75 lakh after 10 years. This example shows how a balanced portfolio can give you a good regular income year after year as well as keep increasing the principal, so that you can meet your expenses even after adjusting for inflation. That is, if you want to make a good retirement plan to get regular income from a corpus of Rs 50 lakh, then it is important to have the right balance of debt and equity.