How should you allocate your retirement funds for old age?

My father will retire in six months. He has accumulated a body of nearly 5 crore and wants to invest in instruments that are not risky so that he can live off the accrued interest. He has, among other investments, set up 15 lakh in SCSS (savings scheme for senior citizens). Its mutual fund (MF) allocations include 2 crore in short-term funds, 1 crore floating rate fund, 50 lakh in balanced benefit funds, 25 lakh in overseas MFs, and 25 lakh each in conservative hybrid funds and liquid funds.

He plans to keep his term deposits and savings balance at 25 lakh each. Is it acceptable for him to opt for the 6% MF SWP (Systematic Withdrawal Plan) to maintain living expenses without eroding capital?

—Palani R

Although the majority of your financial assets are well planned for a retirement portfolio, we recommend a few changes. We advise you to get out of the cash fund as FDs and savings balances should be able to adequately cover emergency provisions. He could consider investing in a medium-term debt fund with good credit quality.

It is also suggested that removing the conservative hybrid fund allocation and investing in a combination of a short-term fund and an index fund instead for this component should help reduce the cost of the portfolio. It is also suggested to allocate the overseas part to indexing offers.

I resigned from a government job after serving for a decade. I want to know if it’s a good idea to continue with my NPS account? If so, how much do I need to add each year to keep it active? If not, what would be the best investment for that money?

—Name withheld on request

We advise you to continue with your NPS account. The minimum NPS contribution is 1,000 per fiscal year. You should also review your asset allocation and fund managers annually, to see if it meets your risk tolerance and performance metrics.

Vishal Dhawan is a certified financial planner and founder of Plan Ahead Wealth Advisors, a Sebi-registered investment advisory firm.

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