Skip to main content

Retirement Fund should Give Positive Real Return

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

Retirement Fund should Give Positive Real Return





Plan well to earn post-tax gains that beat inflation, clear debt before calling it quits

Any discussion relating to retirement in India almost surely brings in the twin aspects of high rate of inflation and the increasing life expectancy.

High rate of inflation in the country is the result of several factors, including the fast growing economy that India is, and also demand and supply issues which are unique to us. The increasing life expectancy, on the other hand, is mainly because of the advancement of medical science and people being more conscious about various health issues. However, when these two issues --higher inflation and increasing life expectancy -are combined, things could turn tough for people who are on the verge of retirement and also for those who have just retired.

According to financial advisors, if the retirement corpus is not used well, which includes putting in place a plan for its growth and also utilization, there is every possibility that over the long life of the retired person, high rate of inflation would either force the individual to deplete the retirement corpus slowly over the years, or he/she may have to compromise on the quality of life. A combination of the both is also possible, they say .

Let us see why this is a possibility. Suppose you have just retired and your family's monthly expenses on the necessities are Rs 10,000. The rate of inflation is 10% per annum while the rate of return that your retirement corpus generates is 9%. At this rate you are falling behind the rate of inflation by a percentage point. The situation could worsen if your investments are in such instruments returns from which attract income tax. Post tax, post inflation rate of inflation could be lower by more than one percentage point.

If your retirement corpus is large enough to meet the your monthly expenses after accounting for the rate of inflation, tax outgo and still leaves you with something extra to invest every year, that is the ideal situation. However, for most just retired or soon-to-retire people, that is not the case. Only a select few are found to be in such a sweet spot. Others need to plan a bit to be in a sweet spot and enjoy the post-retirement life.

There are some easy to follow steps that the soon-to-retire or just retired individuals could follow for a smooth life during their sunset years.

Foremost is that you should plan your investments. Your retirement corpus should be invested in such a way that there is regular flow of income and the principal amount grows for at least the next five years. Financial planners say in case you are not competent enough to plan how and where you should deploy your retirement corpus, it is better to seek professional help.

The retiring person should compute the cash flow. Get used to maintain expenses and income from your investments in a cash flow statement. This statement will track the savings on hand at end of every month which can be used in investments.


After, analyzing the statement you can control unnecessary expenses in a month. Keeping this record will make it easier to analyze your financial situation at end of first year and you can make adequate changes in lifestyle and expenses to plan the future.

The next step is to get rid of debt before retirement or as soon as possible. You should plan to get close out all loans before retiring. Understand at this age you require sources of regular income and not to take up regular outflow to pay outstanding loans.

The next step is to analyze your insurance needs since nowadays the rising inflation impact medical costs. "A medical insurance is a must for you and your spouse. Maintain a record of each medical policy with its coverage, premium due dates and renewals. Also be alert to no-claim bonuses, if any.

And last but not the least: Keep alive your old networks. It could happen corpus created is not adequate to take care of your lifestyle and expenses for the long term. So, it's better to join back the last employer as a consultant or work part time. Take up a work which could interest you like training or a hobby which leads to a source of income after retirement.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...
Read more

Mutual Fund Review: Reliance Regular Savings Equity

    Despite high churn, Reliance Regular Savings Equity has managed to fetch good returns   In its short history, this one has made its mark. Though its annual and trailing returns are amazing, the fund started off on a lousy note (last two quarters of 2005). It managed to impress in 2006 and was turning out to be pretty average in 2007, till Omprakash Kuckian took over in November 2007 and wasted no time in changing the complexion of the portfolio. Exposure to Construction shot up to 28 per cent with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects . Exposure to Engineering was yanked up (18.50%) while Financial Services lost its prime slot (dropped to 6.69%) and Auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average: 25.70%).   When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But even its high cash allocations could not cushion the fall which hovered around the category average. ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now