Design your own post retirement income

The next feasible step after planning your retirement corpus is to plan to earn the desired regular income post retirement. It is possible that the expected amount collected on your last working day may not match with the required sum but the bigger issue is to leave that sum unplanned for later years. So, the work of calculation does not stop at retirement but begins on retiring.

a)    Calculate the tax liability on your collected corpus

The amount to be received on your retirement is never on one particular date, it is received over a time frame of year or so. Like your EPF proceeds are credited in month’ time of your retirement or your PPF gets credited on 1^st week of April. The Bank FDs and other bank products have their own unique maturity dates. So, the best possible manner to understand your tax liability is to break out the receivable maturity funds as per financial year and taxability.

Asset	Tax Liability
Public Provident Fund	Not taxable
Employee Provident Fund	Not Taxable (beyond five years of withdrawal)
Bank FDs	Taxable
Shares Dividend	Not taxable
Equity Mutual Funds	Not taxable
Tax free Bonds	Not taxable
Gold ETF	Taxable

b)        Study your asset list

Around the retirement period, it is best to identify your assets as income earning assets or assets held as only for investment value. It may be possible that you hold many Bank FDs but till now it were only a easy way to invest or a PPF seen as a tax saving haven. But now post retirement it is necessary to make a call on whether the asset should be held for any longer. If not, the same can be used to generate regular income going forward. Like holding a huge portfolio in shares is not helpful for retired individual as the dividend yield is very low in them. Similarly, holding a real estate property if you are not the end user of it is not a good idea if yields no rental income. Also, many people have huge amount of physical gold or ETFs in their portfolio so unless it is earmarked for some end use, it will yield no value to you except adding to your balance sheet totals.   

c)         Study Your Various Investment Options

There are various regular income options to support the financial requirements of every individual, some of the popular investment route are:

	Monthly Income Plans – Mutual Funds/ Post Office	Senior Citizen savings scheme	Bank/Corporate FDs	Pension Funds – Via annuity
Lock In	No such Lock in	Five years lock in	Tenure based lock in. Bank FDs can be broken at a premature date	Lifetime
Taxability	Taxable	Taxable	Taxable	Taxable
Minimum & Maximum Fund Requirement	No Limit	Maximum – 15 lakhs each individual	No Limit	No limit
Expected rate of return ( average based on current returns)	7%	9.2%	9% -9.5%	6% -7 %

• Beyond this a contingency fund providing for any huge medical emergency should be created and kept ready, via investing in liquid mutual funds.

• Also, if you have a empty property it can give good rental yield (although the average rental yield is around 3-4%) if you don’t intend to sell the same due to emotional value attached to it or want to leave it for your nominee.

d)    Transfer of assets to divide the income receipts

At the early stage of your working life make sure that required investment is divided between you and your spouse so the tax liability also gets distributed among both of you on retirement. This ensures that you fall under low tax liability or may enjoy a nil amount of tax due to higher tax slabs for senior citizens (above 60 years).  


Regards
Saarthi Financial Planners
www.saarthifp.com\


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