In today’s world, retirement doesn’t mean the end of financial responsibilities. With people living longer and healthcare expenses increasing, it is important to plan properly for life after retirement. Especially for private sector employees where pension is not guaranteed, creating a steady monthly income becomes very important after 60. With smart investments across mutual funds, annuities, fixed deposits, and government savings schemes, anyone can set up a regular income system that works like a monthly salary.
Let’s understand how a good mix of financial tools can help you stay financially independent in your golden years.
Longer Life, Bigger Responsibilities: Why Retirement Planning is Critical
According to health estimates, the average life expectancy in India is expected to touch 75–80 years by 2050. This means a person retiring at 60 will still have 15–20 years of life ahead — and that too with increased chances of medical emergencies, inflation in daily costs, and the desire to maintain a certain lifestyle.
Most private jobs do not offer pensions. Even in government jobs, pensions may not always be sufficient. That’s why setting up a personalised retirement income strategy is a must for every working individual — whether salaried or self-employed.
Calculate Your Monthly Income Needs First
Before starting any investment, the first step is to understand how much money you will need monthly after retirement. This should include:
- Essential Monthly Expenses: Groceries, electricity bills, water charges, phone bills, transport, and medicines.
- Quarterly and Yearly Costs: Property tax, health insurance premiums, annual health check-ups.
- Lifestyle Choices: Travel, hobbies, outings, entertainment, or family functions.
- Lump Sum Needs: Major repairs, medical emergencies, buying a vehicle, or children’s weddings.
People often assume they will need less money after retirement, but that’s not true anymore. Most people want to enjoy their retirement by travelling, pursuing hobbies, or living comfortably — which means spending doesn’t reduce much.
Traditional Retirement Income Options: Stability with Low Returns
Some investors prefer guaranteed returns even if they are slightly lower. These are good options for risk-averse individuals:
- Fixed Deposits (FDs): Safe and predictable, but interest is taxable and may not beat inflation.
- Senior Citizens Savings Scheme (SCSS): Offers better interest than FDs and backed by the government.
- Post Office Monthly Income Scheme (POMIS): Monthly interest payout, good for regular income.
- Annuity Plans from Insurance Companies: Lifetime pension after investing a lump sum.
While these offer peace of mind, they may not be enough alone because returns are low. That’s why diversifying your money is better.
Mutual Funds Can Help Create Monthly Income Too
Mutual funds are not only for wealth creation; they can also provide monthly payouts through the Systematic Withdrawal Plan (SWP) option. Here’s how:
- You invest a lump sum in a mutual fund.
- You set a fixed amount to be withdrawn every month.
- The remaining amount continues to earn returns.
This is flexible and can be customised to your needs. Even if the market fluctuates, smart fund choices like hybrid mutual funds, multi-asset funds, or arbitrage funds can offer relatively stable returns over time.
Equity Mutual Funds for Long-Term Retirement Planning
If you’re still 10–15 years away from retirement, equity mutual funds can play a big role. They are volatile in the short term, but they usually give higher returns over long periods.
- Start Early: The earlier you start, the more your money grows.
- Use SIPs (Systematic Investment Plans): Monthly investing builds discipline and takes advantage of market dips.
A person investing ₹5,000 monthly in an equity mutual fund for 20 years can easily build a corpus of ₹30–40 lakhs, depending on returns. This lump sum can later be shifted to SWP plans or annuity for retirement income.
Government Retirement Schemes That Give Assured Income
Several government-backed schemes are specially designed for senior citizens. They offer safety and regular income. Some popular ones include:
- PMVVY (Pradhan Mantri Vaya Vandana Yojana): Offered through LIC, it provides pension for 10 years at a fixed interest rate.
- SCSS (Senior Citizens Savings Scheme): Current interest rate is around 8.2% annually, paid quarterly.
- POMIS (Post Office Monthly Income Scheme): 7.4% interest with monthly payouts and maturity after 5 years.
- Atal Pension Yojana (APY): Gives a guaranteed pension of ₹1,000 to ₹5,000 per month depending on contribution and age.
All these can be used together with mutual funds to ensure balance between safety and growth.
Step-by-Step Guide to Retirement Withdrawal Planning
Having money is one thing — knowing how and when to withdraw it smartly is another. Let’s break it down:
1. Follow the Bucket Strategy
- Bucket 1 (0–3 years): Emergency and immediate expenses. Keep in FDs, SCSS, or savings account.
- Bucket 2 (3–7 years): Moderate risk investments like balanced mutual funds or debt funds.
- Bucket 3 (7+ years): Long-term growth options like equity mutual funds or real estate.
2. Use SWP Plans from Mutual Funds
- Choose funds with a history of steady returns.
- Start withdrawals monthly or quarterly.
- You can stop anytime and your principal keeps growing.
3. Tax Efficient Withdrawals
- Withdraw from NPS and EPF carefully to avoid high taxes.
- Use equity-oriented mutual funds for lower capital gains tax after 1 year.
- Spread withdrawals to stay in the lower income tax slab.
4. Avoid Withdrawing Too Much
- Try not to withdraw more than 4–5% annually from your corpus.
- This ensures your money lasts for 20–25 years even after retirement.
Retirement Planning Tips from Experts
Prashant Pimple, CIO of Baroda BNP Paribas Mutual Fund (Fixed Income), says, “You should not wait till you are close to retirement. The earlier you plan, the better control you have over your future income.” He advises using a mix of traditional and market-linked products to maintain a steady flow of money.
The key is to balance safety with returns. While annuities and government schemes provide fixed income, mutual funds give your portfolio growth. Together, they create a powerful retirement income plan that beats inflation and takes care of your lifestyle.
If you’re planning to retire in the next 10–15 years, now is the best time to start preparing your own retirement paycheck. A balanced strategy that includes mutual funds for growth, FDs and SCSS for stability, and annuities for lifetime income will help you enjoy retirement stress-free.
