Retiring? Have 50 Lakhs or 1 Crore in hand – What to do

There are several queries around retirement and along with it getting about 50 to 1 cr and parents not being too financially iterate and hence they were not aware what to be done with that much (or little) money.

Here is a generic answer to all the queries, where the individual who receives the amount is not too financially literate and is preferring not to lose the invested capital.

Short answer : Fixed Deposit. Yes the simple, plain simple deposit is the best and most secure till date, if invested in a big , large bank. Even after the Yes Bank fiasco, the FDs were untouched while more complicated ones like ‘bonds’ were impacted.

What you should do with 50 Lakhs or more from retirement corpus

1. Put that amount in Bank FD offering 5%, and you will get an interest of about ₹ 2.5 L every year, or on monthly basis an interest payment about ₹ 20,000 .
2. Also, if someone gets ₹ 50L+ post retirement, he must be getting some sort of pension or must have planned for retirement. (if not, then generic advises on Facebook or Quora won’t work)
3. Calculate the sum of retirement pension (if any) + ₹ 20,000.
4. Does the amount in #3, take care of the monthly expenses
   1. rent (if any) – ideally by this time, the individual should be in her own house
   2. Groceries & Veg
   3. medical expenses – much needed at this age.
   4. Utilities expense
   5. Petrol/travel costs
5. If #4 is yes. then relax and keep the money in FD.
6. If #4 is no, then see if the expenses in #4 can be reduced to the amount in #3. ie try to reduce expenses. If this answer is still no, then the specifics need to be addressed.
7. Also remember that if he is not yet covered by a health insurance, the best would be to get her covered under your corporate insurance cover, if you have any, or assume that about ₹ 10L from this fund set side for medical emergencies.

As a SEBI registered Investment Advisor, many may be shocked that I did not provide the route of complex strategies and offer an advice that is so basic like Fixed Deposit being a solution. That is as the individual must understand the product and that if the amount from that corpus can cover living expenses there is nothing like it.

At this stage in life, one should not:

1. Indulge in option writing/buying and think of doubling the money, and winning casinos in Las Vegas.
2. Create complex strategies like 25% into Systematic Transfer Plans from Liquid Funds and then plan 15% month on month increase to equity funds. At the age of 80, the individual may not need 1 Cr or 10 Cr and may need his family besides him.
3. Give the money to insurance agents for money back policies, that claim to double the amounts.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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