How to invest the retirement corpus for a steady income?,
Venkatesh is a 55-year-old marketing professional who has decided to retire early. He has been computing his finances and knows that he has built a substantial corpus that will easily take care of the various financial obligations during his retired life.
Venkatesh likes to keep his finances simple and does not want to spend too much time on tracking his portfolio. How can Venkatesh arrange his affairs so that he and his wife have a comfortable retired life?
Venkatesh has to make provisions for his regular expenses after he retires, ensure that funds are available for immediate requirements and nurture the corpus through the retirement period. Given his preference for convenience and simplicity, he should primarily focus on two aspects-selection of products that are simple and meet his income requirements as well as setting a system that eases the operation of these investments.
The regular expenses can best be catered to by an annuity that will make regular payments during Venkatesh and his wife's lifetimes. As these are low-return investment products, annuities will require a larger allocation from the corpus to generate the required income.
The advantage is that Venkatesh is assured of a regular income to take care of his daily expenses. While selecting an annuity, Venkatesh should consider the antecedents of the provider, the rates and the additional features, such as inflation adjusted payuts. He can pick short-term debt funds from a couple of stable fund houses to park the emergency funds.
Some portion of the corpus will also have to be invested in growth assets, such as equity. A simple product that he can consider to provide appreciation is an exchange-traded fund that invests in an equity index.
Venkatesh should try and put most of his financial transactions on auto mode. Choosing automatic account transfers, having his wife as a jointholder for investments and accounts, giving clear instructions to the investment providers and taking care of the tax implications of the investment choices he has made will all reduce the follow-up and involvement required.
However, he will need to check his portfolio at least once a year to ensure that he is on the right track financially as well as take corrective action where required. If he chooses wisely the right products and has a systematic plan in place, he should be able to spend his retirement life as comfortably as he desires.
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