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OLM Desk - 02 July 2021

Retirees Can Allocate Assets in Equity, Debt MF

RMD Bhuinya, Noida

I will retire in January 2022. Apart from other monthly income plans, for a regular cash flow of Rs 40,000 per month from March 2022 onwards, I want a Systematic Withdrawal Plan (SWP) in a debt mutual fund. How much shall I deposit or invest in the fund to get the above mentioned amount and which is a better mutual fund?

Regular income seekers or retirees should invest one-third in equity and the rest in debt or fixed income instruments. One can create asset allocation of equity and debt mutual funds. For ease and convenience, one can invest in equity saving schemes or funds that have above proportion as that can beat inflation. The withdrawal ratio is 4 to 6 per cent so that Rs 40,000 of regular income can be managed. You need to invest a lump sum of Rs 80 lakh if you consider withdrawing 6 per cent a year and if you consider withdrawing 4 per cent then the lump sum amount invested is Rs 1.20 crore. You can consider investing in a few of the conservative hybrid funds. For example, Kotak Debt Hybrid fund, Canara Robeco conservative Hybrid Fund. Alternatively you can also choose a mix of hybrid equity funds, for example, Kotak Equity Hybrid fund, Canara Robeco Equity Hybrid fund, SBI Equity Hybrid Fund. Before investing, consult your financial planner for guidance as per your risk profile.

Hina Shah, Certified Financial PlannerCM & Financial Coach, LUHEM


Nitin,  New Delhi

Kindly advise me on investments for a tenure of two to three years which provide tax-free income. Besides that, suggest a few less volatile mutual funds that fall under the category of equity funds for taxation purposes and in which investment can be made for a tenure of three years.

There are equity-linked savings schemes of different mutual fund houses which can be used for taxation. When you invest for five years or more, you can expect gains that comfortably beat the inflation rate as well as returns from fixed income options. Under Section 80C of the Indian income tax laws, investments of up to Rs 1.5 lakh in a financial year in eligible securities such as ELSS funds are exempt from tax.

When you are investing in equity, be prepared for ups and downs in your investment value. Also, note that you cannot withdraw your money from this fund before completing three years from the date of investment. For example, Axis Long Term Equity Fund, Kotak Tax Saver, DSP Tax Saver, Canara Robeco Equity Tax Saver.

Hina Shah, Certified Financial PlannerCM & Financial Coach, LUHEM


Nikhil Mehta,  Surat

My 80-year-old father has a Public Provident Fund (PPF) account with the State Bank of India (SBI). He has been operating his account for the last 32 years. Now SBI has been told to close the account and redeem all the balance citing the rule that the PPF account can not be extended beyond 30 years. Can you notify me about the rule? Is it possible to continue an account without further depositing money? Would he incur interest on his balance in PPF even if his account is not extended? Please advise.

You can extend the PPF account for a block of five years with or without making further contributions. The extension in blocks of five years can be done indefinitely.

You need to apply for an extension by applying to the bank before one year of maturity ends.

They can be retained with or without making further contributions. The corpus will continue to earn interest till the account is closed.

Suhel Chander, Certified Financial PlannerCM,  Co-Founder, Handholding Financials

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