At a time when though there has been given an indication of a possible interest rate hike, FD rates are still low and to keep with it, small savings schemes interest rate were too on an abrupt basis went lower sharply but primarily due to political reasons have been restored back to only be revised lower in may be some not so distant time. So, amid all such interest rate movement, senior citizen lot amid uncertainty peaking due to Covid 19 times are unable to manage their finances as well as retirement and for them personal finance experts have suggested this bucket portfolio strategy.
Here is all in brief about the strategy for senior citizens
This strategy is dividing your assets based on the time you will draw them out or when you would use them. First bucket can be for assets that you intend to use very soon say may be over the next year or two. This money needs to be maintained in bank accounts,ultra-short bond fund, bank fixed deposit, savings account, short-term income fund.
For other concerns such as regular income money needs to be put into Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office MIS Scheme etc.
Then in the next bucket, you can put in retirement assets which you use to employ in 2-10 years and here the asset mix should be such that does not shows huge volatility. Investment can be in balanced fund, long term bond fund and multi asset fund. Long term debt mutual funds also help in getting inflation beating returns as 7% return can be expected. If we discount the 20 per cent LTCG with indexation benefit available in debt mutual funds, net return post-income tax payment would fall around 6 per cent.
The investments that need to be pooled here include equities which may provide you with good growth on your invested capital. As bucket one runs low, you'll replenish it from bucket two, which in turn should be topped off by shifting money from bucket three.
Simply to say here whenever you are able to make good profits from equities then transfer some of the funds from Bucket 3 to 1. Thus always surplus situation shall be maintained for bucket 1.In this way, Bucket 1 will always be in surplus. Since these are all 'growth' options, Buckets 1 and 2 will perhaps NEVER go down to zero.
This approach enables senior citizens in getting return from their investment that are able to beat inflation which has once again come up over 5 percent.