I will retire in September 2011. I have worked with my present company for 31 years and I am likely to get retirement benefits—gratuity of Rs 2.5 lakh, superannuation of Rs 5 lakh and provident fund of Rs 2.5 lakh. I have my own flat. My only son is married and he and his wife are employed in private companies and stay with me. My wife is a homemaker. I have got other savings such as Public Provident Fund (PPF) and bank deposits of about Rs 10-15 lakh. Please suggest suitable guaranteed monthly income schemes where I can park my retirement benefits and earn maximum returns.
Your existing investments in bank deposits are recommended and can be continued since after retirement you will not receive any pension and it is only your interest income which is your source of income. Similarly, you can consider having post office monthly income scheme and other schemes for senior citizens which give an assured monthly income. The logic is to maximize your returns with high safety as your income after retirement will not come under the tax ambit. Even if it does, you will be taxed at the lower tax slab.
I am assuming that your PPF has completed its tenor of 15 years and would have been renewed for the next block of five years or if not completed will be close to its completion. This, too, gives a pre-defined interest rate. The only concern being that the interest is not paid monthly or annually as the same is cumulative and compounded. However, you have the option of partial withdrawal. This is a good scheme and can be held on.
You can also consider having a monthly income plan (MIP) from a mutual fund. These funds take exposure to equities up to 25% (depending on the scheme you choose). Good options are HDFC MIP, Reliance MIP and Canara Robeco MIP. All three have different levels of equity exposure. HDFC MIP carries the highest exposure among these. And all of them endeavour to consistently deliver monthly income in the form of dividends. However, the dividend amounts may not be consistent and may differ as the equities performance will have an impact on the performance of the fund and hence the dividends.
You also need to make sure that you have a health insurance in place. Hopefully, you already have it. If you don’t, it is highly recommended you buy one. It may be an expensive proposition, but is important.
Surya Bhatia, certified financial planner and principal consultant, Asset Managers
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