Subbu's Solution

My husband will be retiring in June 2015. He will receive Rs 50 lakh in terminal benefits-gratuity and provident fund. He will also get a monthly pension of Rs 20,000. How should he invest the lump sum amount so that his tax liability is minimum and the corpus grows.

Great to see that you want to save your corpus and not spend it on expensive vacations or something similar! Here’s how you can invest this corpus:

Step 1 - Calculate your monthly expenses post retirement. See if the pension (Rs. 20,000) is enough or not. If it’s enough then your asset allocation will differ. If not, invest money accordingly so that he can fulfill his needs of monthly expenses. We presume that this 20,000 is after paying taxes.

Step 2 - Keep a portion of your money aside for contingencies in instruments like bank FDs. This could be one or two years of expenses.

Step 3 - Other than that at this stage of your life, assuming your age is around 58 years, you may invest 10-20% in equities, 10-15% in gold and rest in debt. Generally it is presumed that at this age the risk taking capacity of an investor is low. Therefore you should park your money in less risky asset class like debt and bank FDs also.

However, if you wish to grow your money and your risk appetite is high you can look at equities Remember asset allocation always plays an important role in the kind of returns your investments generate. Please consult your financial advisor before taking any investment related decisions.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

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