I am due to retire from a private company by mid-2011. My wife is a schoolteacher. We have two sons and they are financially independent. We have two residential flats in Mumbai, in the the name of my wife and myself. We live in one and the other is vacant. I have two fixed deposits (FDs)—bank (Rs 63 lakh) and company (Rs 8 lakh). I hold shares worth Rs 56 lakh and have invested in eight mutual funds (MFs) whose current value is Rs 6 lakh. We have no liabilities. We both have Bajaj Allianz Silver Health Policies of Rs 3 lakh each. My company will also provide a medical policy for my wife and myself after I retire. This plan will cover day-to-day expenses up to Rs 70,000 per annum. I will get about Rs 90 lakh, post-tax, as retirement benefits in the second half of 2011. This includes Rs 25 lakh of superannuation fund, which will be converted into a monthly pension at 7.75% per annum (current rate may change). Using my current and retirement funds, I propose to make an investment portfolio of around Rs 2.2 crore. I would invest 66% in fixed income, while 34% in equities. Annuity scheme from superannuation fund, Senior Citizens Savings Scheme, company FDs, bank FDs would generate a monthly gross income for Rs 99,000. Equity MF schemes and direct investment in large blue-chip companies would generate Rs 61,000 per annum, while rent from my second flat will provide another Rs 25,000. My gross monthly income will come to around Rs 1.85 lakh. Please suggest if the above portfolio needs to be improved to enhance the income and reduce tax liability.
You have done a good job in planning you retirement corpus. There is enough diversification in the portfolio and the asset mix you have chosen is right for your age. There are a few changes you can consider as they will be more tax-efficient and will help you manage your portfolio better. You currently have a large exposure to bank deposits. While they are high on safety, they are taxable at your marginal tax rate. It is recommended you reduce your exposure in the same and consider products such as fixed maturity plans, which are more tax efficient. You are able to get the benefit of indexation (provided you keep it long enough to qualify for long-term capital gain) and they are taxable under capital gains tax.
Another change which you should consider is to reduce your direct stocks exposure and consider MFs instead. In case you are managing your equity portfolio actively and buying and selling stocks with better understanding, then you can continue with the same.
You can consider a floater policy, which gives you an additional cover of Rs 10 lakh jointly.
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