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I have received retirement fund of 2.5 crore in October 2020 and invested in equal amount as follows:

- SBI Constant Maturity Debt Fund

- SBI Gilt Debt Fund

- SBI Medium Duration Debt Fund

- Kotak Dynamic Bond Debt Fund

- Axis Dynamic Bond Debt Fund

- Mirae Dynamic Bond Debt Fund

Please advice. I am willing to take risk by investing in equity also, say half the amount.

- Name withheld on request

A good way to take care of your post-retirement monthly need is to invest your accumulated retirement corpus across debt, small savings schemes and equities to ensure growth along with safety. At present all your investments are in debt funds and it will be good to diversify a part of these investments in other avenues as mentioned in your query as well. To begin with, you can park 8-10 lakh as a contingency fund in your savings bank account or fixed deposit and always keep it handy at your end. This money should only be used in case of emergency, else let it remain parked. The remaining amount can be invested in three buckets of low duration debt, medium duration debt and equity. The idea is to withdraw your monthly requirements from these investment buckets one by one. The bucketing strategy would ensure that you do not outlive your savings as the post-retirement phase is usually for 20 to 25 years and at the same time inflation will continue to exist. Hence, your overall portfolio should be able to generate higher returns than inflation. Such strategy gives sufficient time for the debt and equity-oriented investments to grow at the same time immediate needs can be taken care of by withdrawing from the low duration debt and liquid funds.

Your present monthly requirement will help you to work on how much you need to invest in each of these buckets as the future withdrawals need to be inflation-adjusted as well. Just to give an example, if you need 1 lakh every month today to take care of your monthly retirement needs, you may invest 25 lakhs in Low Duration Debt Funds, 1.68 crore in Medium Duration Debt and 50 lakhs in equities. The plan will be to withdraw inflation-adjusted Rs1 lakh every month for the coming 300 months (25 years) using the following withdrawal strategy:

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You can also consider investing in Senior Citizen Savings Scheme and Pradhan Mantri Vaya Vandana Yojana (PMVVY) as these are good investment options for retired investors. In debt funds, you may prefer funds with medium duration instead of long duration as these long duration funds are subject to higher interest rate risk. Dynamic bond fund managers would ideally take their calls based on interest rate cycles and may work for you. But, you may also diversify some allocation in Banking & PSU Debt Funds and Corporate Bond Funds. In equity funds you may invest predominately in Nifty Index Fund and Large Cap Funds along with a small allocation in Flexicap Funds.

- Answer by Harshad Chetanwala, founder

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