How to design your post retirement portfolio?

Planning

oi-Sneha

By Perfios Money Manager

Published: Monday, May 20, 2013, 10:33 [IST]

Retirement could mean different things to different people. It is said that retirement is when you stop living to work and begin working at living. Retirement can be defined as the age where a person may stop being actively employed. However, one can also extend the term retirement to the age at which a person becomes financially free, which means one does not have to any longer work for money.

Until almost a decade ago, retirement to most salaried people meant the age of superannuation with their employer which would typically be about 58-60 years. More recently though, people are aiming to retire much earlier than the company's retirement age with the intention of either starting out on their own or just enjoying a relatively relaxed life where they can catch up on everything they missed during their working years. Either way, it involves making a choice. And the option to make that choice is possible only if one becomes financially free.

Assuming that one does get there and has a large enough corpus accumulated, the big question facing every retiree is "Where do I invest all this money?" This is indeed a pertinent question but before we answer that, let us look at what typically an individual may have accumulated at retirement.

There could be employee benefits such as provident fund (PF), superannuation and gratuity. While PF and gratuity are lumpsum receipts, superannuation gets converted to a monthly stream of income in the form of pension.
There could be other investments such as mutual funds, gold, public provident fund, fixed deposits, pension plans of insurance company, shares and any other financial investments.

There could be properties either self-owned or ancestral, that may or may not be generating a rental income.

Now let us look at what one should do to build an effective portfolio which can last through the retirement years

1. The first step would be to consolidate all your investments and assets. While one can do it offline, it may be better to use a money management software which can help consolidate, track as well as monitor your assets.
2. The next step is to budget your regular or day to day living expenses. It is important to know what would be your spends under different expense heads and also division between monthly and annual expenses.
3. Thirdly, one needs to identify all the sources of income in the post retirement period. There could be income from part time employment or vocation, rental income from properties and pension or annuities. Assess the shortfall in income, if any vis-à-vis the expenses. This shortfall should be met from your investment portfolio.