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Retirement planning: How to get Rs 1 lakh monthly pension after retirement; check investment planning, calculation


How can a senior citizen earn a regular pension of Rs 1 lakh every month after retirement? A common question that is often asked by those who are about to retire. While investing your hard-earned money, you need to plan well and consider multiple factors — inflation, your risk appetite, how much return it will deliver, how much tax you have to pay, how liquid your investment is, etc. Keeping all these factors in mind, ET Wealth Online tries to derive a retirement plan for senior citizens that can fetch a Rs 1 lakh monthly pension.

How can senior citizens get a monthly pension of Rs 1 lakh?

The first thing that senior citizens need to ensure that they have the desired corpus to generate the monthly pension. Soumya Sarkar, Co-Founder, of Wealth Redefine, says “To achieve a monthly pension of Rs 1 lakh, senior citizens typically need an investment of approximately Rs 1.2 crore to Rs 1.5 crore. This estimate is based on an expected return rate of 8-10%.”

Now where a senior citizen needs to invest will depend on his risk appetite. If you are a conservative investor, you will prefer debt instruments such as fixed deposits, Post Office Monthly Income Scheme (POMIS), Senior Citizen Savings Scheme (SCSS), RBI Floating Rate Savings Bonds, government securities and debt mutual funds. However, if you need higher return and if you have a higher risk tolerance, you can opt for equity-oriented mutual funds.Anand K. Rathi, Co-Founder of MIRA Money says, “A balanced investment approach involving both debt (like fixed deposits or bonds, which are safer but offer lower returns) and equity (like stocks or mutual funds, which are riskier but offer higher returns) is advisable in such cases.”

Here’s a detailed breakdown of how senior citizens can get regular pensions, tailored for conservative, moderate, and aggressive investors.

How can conservative investors earn a monthly pension of Rs 1 lakh

Here is an investment strategy for a monthly pension of Rs 1 lakh for senior citizens who are conservative investors. S. Sridharan, Founder and CEO, of Wallet Wealth LLP suggests, “A conservative investor might look for a mix of debt-heavy instruments with some equity exposure to maintain stable returns. Here’s a suggested allocation.”

Interest rates on senior citizen fixed deposits (FDs) are typically higher than the regular deposit rates. At present, senior citizens can get up to 7.75% interest on FDs maturing in ten years in private sector banks. In small finance banks, the interest rate FDs can go beyond 9.5% on select tenures.

Assuming senior citizens get around 7.5% return from fixed deposits, around Rs 25 lakh can be invested in various fixed deposits. You can get a quarterly payout of Rs 46,875 which is equivalent to a monthly income of Rs 15,625. Do not park all your money in a single fixed deposit. You can spread your entire FD corpus among private and small finance banks. To ensure higher safety of your FDs you can deploy them in different right and capacities to enjoy Rs 5 lakh DICGC cover on each FD. You can invest in FDs in various capacities — One FD can be in your name, one FD can be in the name of your spouse, and one could be a joint FD with your child — to take advantage of deposit insurance of up to Rs 5 lakh.

Senior Citizen Savings Scheme (SCSS) is another debt instrument where senior citizen can part their money for a regular pension. Senior Citizen Savings Scheme offers an interest rate of 8.2% for the June-September quarter. So senior citizens can park Rs 30 lakh in SCSS that will fetch Rs 61,500 every quarter (Rs 20,500 per month), says Naveen Kukreja, Co-Founder and CEO, of Paisabazaar. One of the biggest advantages of the Senior Citizen Savings Scheme is that the interest rate is fixed throughout the scheme’s tenure — five years. “Keep in mind that senior citizens can claim a tax deduction of up to Rs 50,000 per financial year under Section 80TTB on interest income earned from bank FDs and SCSS investment,” says Kukreja.

RBI Floating Rate Savings Bonds is one of the most popular debt products to generate regular income. Currently, it is offering a very good return of 8.05% interest per annum. However, the interest rate of this bond is not fixed and it is revised twice a year. Interest amount is paid semi-annually. So if you invest Rs 35 lakh in you would get Rs 1,40,875 every six month which is equivalent to Rs 23,479 per month.

To generate a hassle-free monthly income with minimal risk, consider investing in debt-oriented funds. Senior citizens can invest a lumpsum amount, say Rs 30 lakh in long-duration debt funds and start a systematic withdrawal plan. Historically these funds have delivered returns of 6-7% per annum. At a 7% interest rate, you can earn Rs 16,865 monthly from this debt-oriented SWP for the next 20 while your initial corpus will remain intact.

Senior citizens can also consider investing another Rs 30 lakh in hybrid mutual funds that invest in both debt and equity. One such mutual fund is balanced hybrid mutual funds, which have delivered returns of 9-11% per annum. At 10% interest rate, senior citizens can get a regular pension of Rs 23,732 from this SWP for the next 20 years after end of which you can get your corpus back.

Investment amount: Rs 1.45 crore
Total pension: Rs 1,00,201 per month

To reach a pension of Rs 1 lakh/month, the individual can either invest more or take a slightly higher exposure in equity (via aggressive hybrid funds or large cap funds), which could boost returns.

How moderate investors can get Rs 1 lakh monthly pension

An investor with moderate risk-tolerance may take more exposure to equities, while still maintaining a safety net of fixed-income investments, says Sridharan.

The individual can invest around Rs 10 lakh in fixed deposits for a return of 7.5% per annum. From this, he will get Rs 18,750 every quarter or Rs 6,250 per month. He can invest Rs 30 lakh in Senior Citizen Savings Scheme to get a monthly pension of Rs 20,500. Rs 35 lakh in RBI Floating Rate Saving Bond would give you a monthly income equivalent to Rs 23,479.

The next Rs 35 lakh could be invested in balanced hybrid mutual funds to start a SWP. At 10% return per annum, it can fetch him Rs 23,732 for the next 20 while the initial corpus will remain intact.

If he has a risk tolerance, he could have another SWP of Rs 30 lakh in large-cap equity mutual funds. At 12% interest per annum, he could get Rs 28,198 per month this investment for the next 20 years. His will get the initial corpus back after 20 years.

Investment amount: Rs 1.35 crore
Total pension: Rs 1,02,159 per month

How to get Rs 1 lakh pension per month after retirement: Aggressive investor

An aggressive investor may have significant equity exposure for higher long-term returns while keeping some funds in safer investments. The senior citizen can invest Rs 10 lakh in senior citizen FDs that offer 7.5% post-tax returns. From this, he will get Rs 6,250 per month. He can invest Rs 30 lakh in Senior Citizen Savings Scheme to get a monthly pension of Rs 20,500 (Rs 61,500 every quarter).

He can invest Rs 30 lakh in equity-oriented hybrid mutual funds to start a SWP. At 10% returns per annum, this investment can offer a monthly pension of Rs 23,732 for the next 20 years. His initial corpus will remain contact after 20 years.

He can invest Rs 55 lakh in aggressive hybrid funds or large-cap mutual funds or flexi-cap mutual funds that have historically generated 10-12-14% returns. He can start a SWP for a regular pension. At 12% return per annum, he can earn Rs 51,696 every month for the next 20 years.

Investment amount: Rs 1.25 crore
Total pension: Rs 1,02,178 per month

3 things senior citizens must keep in mind while investing for regular pensions

For regular income for senior citizens, follow the LSR rule — liquidity, safety + stability and returns, says Sirohia of INDmoney.

Liquidity: Senior citizens want to choose an option that does not lock-in their investments for a long time. It allows the flexibility to withdraw money in case of need. “Liquidity is crucial, so consider options that allow access to funds in case of emergencies,” says Krishan Mishra, CEO, FPSB India.

Stability: You want the income to be stable and last a lifetime. “While mutual fund SWP, interest from FDs generate stable income however if your return expectations change and you start withdrawing from capital then you might run the risk of running out of money. You want to ensure that the corpus is generating more returns than inflation. Plan for inflation-adjusted cash flows. The trick is to review annually and place part of your portfolio in asset classes like balanced funds that outpace the inflation rate,” says Sirohia.

Soumya Sarkar, Co-Founder, of Wealth Redefine adds, “Given the importance of maintaining capital for regular income, regular guidance and careful management are essential. One wrong investment decision could jeopardize the entire capital.”

Safety: Seniors can manage capital protection by diversifying their portfolio well across asset classes and ensuring that the overall portfolio is generating the desired income.

“Diversifying across asset classes helps spread risk and ensures your portfolio remains resilient in changing markets,” says Mehta.

Returns: Stay informed about inflation’s impact on your purchasing power and explore options like inflation-adjusted annuities, says Mehta. “Returns should be considered post-tax. Ensure that the instrument is tax-efficient,” says Sirohia.

“While debt will provide regular pensions, equity will serve as a buffer to counter the inflation-related depletion of capital. For those who are 60 plus or 65 plus and have about 25-30 years ahead of them, it is recommended to have around 60-65% of their portfolio in debt. This will ensure a steady pension flow, including senior citizen FDs, pension plans, and provident funds. The remaining 20% could be allocated to high-growth, large-cap funds, with the rest distributed between equity and debt funds. This flexibility empowers you to tailor your investment plan to your needs,” says Anand K. Rathi.

“Do proper nomination and succession planning,” Sirohia adds.



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