Many people ask a simple question : “I am a retired person, I want returns of about 10% on my corpus, but I do not want to take ANY risk whatsoever”.

In a country where the most successful banks pay about 8% p.a. to a senior citizen, why do you think you DESERVE to get 10% p.a. WITHOUT any risk? I mean, think again. Is it possible that somebody will pay you a RISK PREMIUM of 2%p.a. and make sure that there is no risk? If you answered yes to this, go on dreaming. As of now there is no GST on dreaming.

What should you do to ensure a LOW risk RETIREMENT strategy?

Well there is no doubt that you should have 30 times your annual income as a RETIREMENT CORPUS. So if your ANNUAL expenses when you retire is Rs. 500,000, you need about Rs. 1.5 crores for your Retirement. We are of course assuming that you will die at say 86 or 90…by which time this corpus may have run out of steam.

When you are 22 you know that you will retire at 60 (your appointment letter says that)…so there is no excuse to look surprised at 60. Start saving/ investing when you are YOUNG – and make sure that you do not touch the amount till you retire.

Now assuming that you have Rs. 1.5 crores, how will you invest the same? well between you and your wife you can invest Rs. 30L in Senior citizens Savings scheme and Rs. 30L in Lic administered Vrida Vay Yojana. This should give you returns of about 8% p.a (for calculation purposes) giving you an income of Rs. 2.4L per annum each. This should meet your day to day expenses – for the first few years. The remaining Rs. 90L should get invested in MUTUAL FUNDS with GROWTH OPTION. Of course keeping about Rs. 10L in a bank fixed deposit also makes sense. As of now there is no tax on your income. In case your income goes up (like you have a pension, etc) you should put Rs. 1.5L per annum in ELSS with a clear view that you will redeem that ONLY when you are past your age of 70.

A portion of the money can go to buying an annuity – but not at 55. Your first annuity buy should be at 68 and the second one at your age of 83 or thereabouts. Sure when you have 90L to invest, a portion should be in ultra short bond fund, a portion in the Nifty and a portion in the Nifty next. That’s all. You do not need to know much about mutual funds, just how to fill the form..and issue a cheque.

Once you have the magical figure of 30, you might be tempted to think “should it not be 40 or 50…” . Of course it could be, but then the thought is going to be endless. Anything above 30 times can go into the index fund with clarity that you will withdraw a portion when you need it or at fixed intervals like 80, 90 and 100. Don’t laugh. Many people reading this post are still in the 20s. Good chance that these kids will live up to 120. Age of 100 seems to be very likely for many people of my generation.

Think of yourself as a “Defined Benefit Contributor” who has been appointed to ensure that you get an ASSURED amount on the 5th of every month. Of course you are worried about longevity, but you realize that it is not worth taking a risk. Fair enough.

Putting money in equity protects you against inflation. If you retire at 60, you have to provide for 40 years of living (46 assuming your wife is 6 years younger ) a pinch of equity surely helps. If you have had equity funds or direct equity in the past you understand that equity protects your money against the ravages of time

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  1. brilliant article. goal for everyone is to reach 30x as soon as possible and then build cushion by aiming for 35x, 40x etc. don’t forget to enjoy life alongside.

  2. Excellent article…but somehow the expectation that our generation and our kids will live beyond 90, 100 or even 120 is a bit far-fetched. The current life expectancy in India among men is 68 and women 71. I am in my 50s and the incidence of lifestyle and non-communicable diseases like Heart problem, diabetes, cancer, renal problems etc are alarmingly high in my generation and among even younger. Environment, modern day stress and bad lifestyle habits like obesity, lack of physical exercise mainly contribute to this pandemic. With modern medical treatments, how long can you prolong your life when you get any of these diseases in your 50s or even 60s – 10 years or if you are luckier, 20 years?

  3. Agree with Meena, the lifestyle of people earning 10L per annum today is one that’s not healthy.
    So 70 or 75 could be the max for the average person today.
    Next issue is retirement is taken for granted at 60. I guess that only applies for govt servants and the CEO materials. Most other skilled Pvt sector employees get driven out much earlier by companies in the name of cost cutting.
    So this calculation is a very optimistic one.

  4. it is assumed retiremnt at 60 . for private employee it does not hold good awalys . 50 should be age , u should target . 35 or 40x should be good enough …

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