Opt For Liquidity Post-Retirement

Nithyananda Deo, Amravati

I am a senior citizen and receive a pension of Rs 60,000. I have a retirement corpus of Rs 1.5 crore, from which I plan to spend Rs 25 lakh on my child’s marriage. Additionally, I have around Rs 60 lakh in fixed deposits, Rs 30 lakh in the Senior Citizen Savings Scheme, and the balance in post office schemes and equity-linked savings schemes (ELSS). I have a health cover of Rs 15 lakh and a life insurance cover of Rs 80 lakh. My pension is more than I require. Should I invest the surplus amount in real estate or mutual funds? Please advise.

Real estate as an investment has been yielding less in the past few years because rental income typically reaches a maximum of around 4 per cent. It is taxable, resulting in returns lower than inflation, and thus money is not growing. Further, from the taxation aspect also, any income from real estate is considered under the “income” head, adding to your tax liability. Another point is the selling aspect—sometimes, it can be difficult to sell property due to various reasons such as location, demand-supply dynamics, age of the property, and others. Additionally, it is not a liquid asset, it involves capital gain, and is not easy to pass on to legal heirs due to the legal formalities involved in inheriting a property. It will also add to your hassle in your golden years, as you will need to continue renting it out, maintaining it, and paying maintenance costs.

Instead, equity-oriented hybrid and equity mutual funds are liquid, give better returns in the long run, and can be sold any time you want. Only a 10 per cent long-term capital gains (LTCG) tax needs to be paid on profits beyond Rs 1 lakh. Moreover, they are easier to pass on to nominees. Thus, mutual funds are a better option considering your circumstances. Please consult with your financial planner or a mutual fund distributor for guidance regarding mutual funds.

Hina Shah CFP®  Financial Coach

Maitreyee Raj, Sanchi

Over the years, I invested Rs 6 lakh in ELSS, which has now more than doubled in value. The funds I invested in are not performing well, and I want to redeem them and invest in some small- and mid-cap schemes. I am 48 and can invest this money for around 6-8 years or loger. What could be my options in MFs for building a decent retirement corpus?

If you redeem the ELSS schemes and invest in small- and mid-cap schemes, we suggest you look at investing in these categories for a longer period, for at least 7-10 years, as small- and mid-cap funds are more volatile and require a longer holding period to deliver better returns. We suggest you get in touch with a certified financial planner or advisor for a basic risk profiling and to better understand your risk appetite.

If you are ready to take higher risk, invest in small- and mid-cap funds. You can consider investing in funds, such as Kotak Emerging Equity and Nippon India Growth Fund in the mid-cap, and Kotak Small Cap and Canara Robeco Small Cap Fund in the small-cap categories.
After your retirement, you may consider taking exposure in equity hybrid funds because they are less volatile compared to the small- and mid-cap funds.

Suhel Chander, CFP®, Handholding Financials

Chandresh Kumar, Indore

My father wrote a Will in which he left the house and investment in my mother’s name and all the jewellery in my sister’s name, but nothing in my (son) name. He also bought a piece of land, but this was after he wrote the Will. Thus, it is not mentioned in the Will. In whose name should this land go? Can I make a claim on it?

The property, which is not mentioned in the Will, will devolve upon all the legal heirs as per the Hindu/Indian Succession Act.

Uma S Chander, CFP®, Handholding Financials