Here is a small analysis:

Your only dependent is your wife (assumption - she doesn't have an income of her own), so you need insurance just enough to take care of her in case something happens to you. The sum insured should be such that out of its interest, your wife can live comfortably.

If her cost of living = 3000 / 2 = Rs. 1500 per month, which is Rs. 18000 per year, she would need around Rs. 2 lakhs to earn Rs. 18000 as interest on it. With some buffer, I would suggest that you get insurance of Rs. 2.5 lakhs. Go for term insurance, which would also be the cheapest for you.

As far as investments go, at the age of 65, you shouldn't invest too much in risky avenues. Since I don't know the amount of your savings, let me give you a general picture.

A portion of your investment should be liquid, so that emergencies (like medical emergencies) can be taken care of. You can invest in bank's flexible fixed deposits, wherein the amount is kept as an FD, but can be withdrawn any time.

You can invest most of the balance amount in the government's Senior Citizen Scheme. You can also invest in normal bank FDs (with a monthly payment option) and mutual fund monthly income plans (although I personally do not prefer those).

Please remember to keep a small portion - say 10% - for equity mutual funds - they would give excellent returns in the long term and would help you beat inflation and the resulting increase in your cost of living.

Also remember - your biggest asset is your house.

First of all, since you own your house, you need not pay rent every month - that is such a big relief! Secondly, if you and your wife do not have dependents, or do not intend to leave the house to the kids, you can also explore the possibility of something called a Reverse Mortgage. In this case, you would pledge your house to a bank, and the bank would pay you a fixed amount every month!

Happy investing!

Hi!

Here are a few pointers that you can use for your retirement planning:

1. More than the current income, observe what your current expenditure is. Find out what your expenditure would be at the time you retire, considering the changes in family situation. Don't forget to factor in inflation in your calculations - you can use the average inflation over the past 10 years.

2. So, the amount you need when you retire should be such that it gives returns that can meet your expenses as calculated above.

Now, how to invest so that you reach that amount:

Since retirement is many, many years away, invest in equities. You can do this safely through mutual funds. Do a research on good diversified MFs on www.valueresearchonline.com. Invest in top rated MF schemes through SIPs. Also review the performance of your MF scheme once a year.

Insurance: Don't invest in ULIPs or endowments, stick to term insurance plans. Cover yourself adequately, considering the needs of your dependents.

Also buy health insurance for yourself and your family, if it is not provided by your employer.

And most important - start investing NOW. The earlier you start, the more would be the benefit of compounding!

Happy investing!

Let’s examine your savings:

Money in MFs: Rs. 20 Lakhs

Cash: Rs. 8 Lakhs

Total: Rs. 28 Lakhs

If you retire, you should invest most of the money in safe instruments that give a steady stream of income, like bank a Fixed Deposit (FD), Post Office Monthly Income Scheme (PO MIS) or Senior Citizen Scheme.

Some portion of the money should be invested in diversified equity mutual funds (MFs), so that you get an inflation beating return in the long run. This would help your principal grow, so that you can earn more in subsequent years and take care of increased prices.

Let’s say you invest 20% in diversified MFs, and invest 80% to earn regular income.

Today, you can earn around 7% per annum post-tax using safe avenues like bank FDs. Thus, your post tax income on Rs. 22.4 Lakhs investment would be Rs. 1,56,800 per year. Or, around Rs. 13,000 per month.

The remaining 20% (Rs. 5.6 Lakhs) would be invested in equity for the long term, and any income from that should not be considered as a part of your annual spend-able income. It would be used periodically to enhance your interest bearing capital over the years.

Thus, if your current expenses are less then Rs. 13,000 per month, you can retire today with your corpus of Rs. 28 Lakhs.

In my opinion, this income might be a little low to take care of day to day expenses, with costs increasing every day! Here are a few thing to consider:

1. You work for a couple of more years, and increase your corpus so that you can get a higher income.

2. Have you considered all your savings? You have mentioned Rs. 20 Lakhs in MFs, and Rs. 8 Lakhs cash. Do you have some money at other places – like Provident Fund (PF), Public Provident Fund (PPF) or National Savings Certificates (NSC)? If so, include it in your corpus!

3. After retiring from your regular job, take up a part-time supplemental job in a field that you like – related to something that you always wanted to do. If you like painting, you can teach people to paint. Or you can teach kids at a pre-school. Anything that you absolutely enjoy. That will augment your income, and would keep you occupied in a way you enjoy!

Note: Since I didn’t have enough details, I have made the assumption that you don’t need to make any big-ticket spends in the future, like buying a house or a kid’s marriage.

For more on planning for retirement, please read "Want to retire early? Here’s what you need".

1 year is quite short a duration to explore too many options. Especially, when you are looking for safe options. Equities would be the the safest option - if you are looking at 5 years or more.

I believe a bank fixed deposit (FD) would be the best option for 1 year. You can have a look at what ICICI bank is offering - you can earn 8.5% for a 390 day term deposit, which is among the best rates available today.

Dear Naveen,

Thanks a lot - I am very glad that you liked the article.

It is really good that you are thinking about retirement at a young age - it is best to start investing when you are young, so that you can reap the benefits of long term investment.

The bset long term returns are given by stock investments - there is no superior option. Therefore, it is wise to invest in equities, and stay invested for the long term.

Also, I understand that you want to make a one time investment - but that would mean you would need perfect timing to invest at a time when prices are the lowest. This is difficult, and therefore, it is best to distribute your investment over at least a few months.

There are many articles on www.RaagVamdatt.com related to these topics. In the comment below, there is a list of some of the articles. There are many more to explore, but you can start with these.

Happy investing!