Where To Park Your Retirement Funds???

06/08/2012 by Padmanaban Balasubramanian

It is yet another view of how to choose an investment vehicle for our retirement funds to beat inflation. I am not here to change any one and I don't believe that I can change anybody, at the same time I would be very happy if you look at this mail and supporting data as one more perspective probably you appreciate the efforts I have put in.

Thanks a lot for your continuous reading....

In India people who work for Government Service, saves 10% of their basic salary for their pension fund. Which keeps accumulating over the entire service, is almost 30 plus years?

At the time of retirement, 1/3 of the pension fund can be taken as a commutation and the rest can be given as a pension as long as the individual survives and after that spouse will get 50% of the pension till her life time.

Today, many of us are working for non-govt. service so we do not have the privilege to enjoy any pension from our employer. But, if one contributes the same thing what the govt. employee does it (without their knowledge/unconsciously) then we can also create a much bigger corpus, provided one is disciplined. These are the accumulation phase.

When it comes to distribution phase, everybody has a got a worry and where it can be put it safe and withdraw on a monthly basis, so people choose different vehicle without understanding its risk vs reward or return.

Whenever advisor or planner advice for their clients, as far as retirement planning is concerned they asked to put it in a much safer place, because the investor/client do not have the time to create more wealth. Yes, it is very true. But, at the same time if the individual is committed, as if it is like a government pension, and don't have the right to withdraw that money, then they can take a little risk because of longer tenure.

Whenever we don't have the option or choice to exercise we are not questioning anything, but given a choice we want to question everything.

I always believe in numbers and it excites me whenever am fiddling with the data.

Today, I have taken two balanced funds which exist for more than 17 years (HDFC Prudence and Birla Sun Life 95 Fund) and I have taken 10 consecutive years, if one invested their retirement kitty and keep withdrawing 10% per annum as interest and withdraw monthly. It not only gives monthly pension but also give appreciation in the pension kitty, I have attached the data for your reference.

If the same thing can be extended for 15 years then the appreciation is mind boggling. All the 15 plus years markets are volatile and it has seen all the ups and downs.

When people are betting on PROPERTY and GOLD which is basically speculative investment in nature and don't have the proper track record which is not regulated by any regulator. Why don't one look at the investment which has a strong track record and highly regulated  by the regulator, for our better future.

I am just sharing with you one more perspective to look at the investment and what are risk and the reward over a period of time.

When we go to different places, we deploy different vehicle to reach the destination like walking, cycle, two wheeler, car, bus, train and flight. But, when it comes to investment most of them are using only Bank Deposit, Post Office and Insurance which is a two wheeler and to cover a long distance these vehicle will be a disaster.

Investment is very simple, provided if you are disciplined and understand how each instrument behaves then money will never ever be your problem at any point of time.

We have 365 days' time to work for money and hardly found time to manage whatever we have earned. It is not lack of time, it is lack of interest, but if each individual spends a day at least in a year, they have much control over their finances than ever before.

It is after all our hard earned money, if we do not take care then who else will.

SWP 15 Years
SWP
SWP with inflation adjusted