You had a fantastic work life, said goodbye to your colleagues and are now heading towards that great uncertainty called ‘retirement’. The provident fund accumulated over the years looks good, you may be entitled for a pension and in addition to that, there may be other savings as well that you have accumulated during your work life. But this doesn’t mean that your financial planning for post retirement life is over.
Pension and PF might sound nice, but you also have to allocate the funds received periodically or in lump sum. This means that the returns made from these investments should not just beat inflation but also minimise the amount of tax that you have to pay.
How you manage your post retirement income wisely is the key to a successful retirement life. So, a disciplined approach towards managing retirement funds is vital.
There are several financial products which can be chosen by the investor for putting his/her retirement corpus or retirement income. Given the need for generating returns that beat inflation, and in order to maintain your current lifestyle in the future as well, stocks should be one of the ideal parts of your retirement portfolio. Since debt instruments cannot always make a consistent return which beats inflation, addition of equities of quality businesses which are listed can add value to your portfolio. The fantastic thing in this case is that, dividends from stocks are tax free up to the limit of '10 lakh a year. However, the profits made by selling the equity investments within a year of purchase are taxable at 15 per cent per annum. To avoid this, one could invest with a long term view of one year.
Post retirement, it is also important to save as much tax as possible to boost the returns you can generate from your investments. Since evaluation of tax liabilities before selecting the investment options are crucial, one should try to take a balanced step between income generation and tax saving.
The author is Executive Director at Moat Multi Family Office, Kochi
