I am retiring next month. I have three dependents - my wife, daughter and father-in-law. My monthly household expenses will continue to be Rs 50,000 post retirement.
I am planning to work as consultant post retirement till I am 68. I may earn Rs 30,000 a month. My son will start earning Rs 4.7 lakh annually from May, but it will be saved for his future.
Please suggest changes to my portfolio, if required. I expect to live up to 80 and want a comfortable life. For my daughter's marriage I may require Rs 10 lakh at present value, in 2018.
Assets: Flat at Kolkata in joint name; present value Rs 30 lakh (sparingly used). Flat at Pondicherry in wife's name and let out for Rs 10,000. Its present value is Rs 35 lakh. Self occupied flat at Chennai worth Rs 70 lakh. We will receive two flats worth Rs 70 lakh as a share of our ancestral property.
Savings: Deposits of Rs 12.25 lakh to meet education cost of my daughter's MBBS.
Insurance: Rs 1 lakh single premium in Smart Invest Pension plan; Rs 1 lakh a year in Life Partner Plus Endowment (10 pay) from 2010; ULIP Smart Invest pension Super (5pay) from 2010 annual premium of Rs 1 lakh; ICICI Pru Rs 50,000 Life time Pension from 2010. Endowment Jeevan Mitra sum insured Rs 1 lakh maturing in 2013.The annual premium is Rs 4,686.
Pension plan: New Jeevan Suraksha for 10 years at Rs 10,000 a year, maturing on 2014.
Investments: Principal Debt Saving Fund-(MIP) Rs 1.5 lakh; Sundaram BNPP SMILE Rs 1.5 lakh; IDFC Premier Equity Fund: Rs 30,000 and 12 SIPs of Rs 3,500 till April 2012; HDFC Top 200 SIP Rs 2,000 for last two years; LIC Top 100 bought in NFO in January 2008 Rs 5 lakh; 600 shares of L&T and 2,000 shares of GVK Power. I hold Kisan Vikas Patra (KVP) with maturity value of Rs 2.5 lakh in Aug 2012.
Retirement settlements including leave encashment of Rs 20 lakh and a pension of Rs 7,000 a month. I also have a health cover of Rs 3 lakh with annual premium of Rs 17,500.
We often come across individuals who continue high investment commitments beyond their retirement. This is not an apt portfolio for a retiree. For instance, for the next few years your annual outflow will be higher than even the income that you are about to receive.
If you do have surplus, it will make sense to invest them to meet future shortfalls. But then, this should not be deployed in avenues that will yield returns even lower than the rise in prices or inflation.
For your daughter's marriage you can sell your holdings in shares of L&T to meet the expenses.
If you wish to manage your expenses on your own, without your son's help, then may need to resort to reverse mortgage at the age 68. This, if you find it difficult to curtail your monthly expenses, Once you stop working you will face a shortfall, even after considering your rental income and pension from insurance companies. Since your asset allocation is not optimal and you are overweight on real estate, reverse mortgage may be the best option to meet a part of your requirement.Selling one of the flats may also be considered. We recommend, if possible, that you let out the Kolkata house on rent rather than idle it.
Use some of the maturity proceeds such as KVP and insurance to meet your annual retirement for the next few years.
With age catching up, your risk tolerance is likely to undergo a change, especially once your income levels are reduced. Hence, it may be better to sell your shares or at least dilute holdings especially when markets run up. Shift such gains to debt. But consider retaining the stock of L&T for long term wealth creation, after meeting your daughter's wedding expenses.
Sell underperforming funds - LIC Top 100 and Sundaram SMILE - and shift it to HDFC Prudence through systematic investment plan over the next six months to cost average your purchase price.
Sell Principal Debt saving fund and shift it to consistent performer HDFC MIP Long Term fund. Once your SIP is over in IDFC Premier Equity continue to hold the scheme for at least a year. Since it is mid-cap fund and hold higher risks, gradually book profits and move it to safer avenues.
With interest rates at their peak, lock your retirement benefits for 10 years in FD.
Although you may be in good health condition its better to buy a top-up plan from general insurance companies for another Rs 3 lakh to ensure that you do not have to disturb your retirement kitty.