One of the good things that has happened in the last 20 years is increased life expectancy. Indian males had a life expectancy of just 35 years when we got independence in 1947. Now it is over 70 years. But this also has a flip side.  “This increases the risk of outliving your retirement nest. This is because now you have more years to sustain yourself and more years means – more inflation your portfolio will have to face!” Madhupam Krishna, Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA) and chief planner, WealthWisher Financial Planner and Advisors. Adjust Inflation In Your Retirement.

Also Read: How Is NPS Gratuity Calculated, And Who Is Eligible?

Invest A Small Portion Into Equities 

Senior citizens may adjust their spending habits by reducing expenses during retirement. “Additionally, they might invest a portion of their corpus in assets that have the potential to outpace inflation, such as equity mutual funds, while maintaining a balanced asset allocation with safer investments like debt funds. This helps generate real returns and ensures their corpus lasts longer,” says Chirag Muni, executive director, Anand Rathi Wealth.

Muni adds that to ensure consistent income during bear markets, retirees should invest in asset classes with low correlation, such as a mix of equity and debt. An 80:20 ratio of equity to debt has historically provided balanced and consistent returns, around 12 per cent in the long term. This strategy helps mitigate risk while allowing growth that can outpace inflation, ensuring that retirement income remains steady even during market downturns.

Generate Inflation-Beating CashFlow 

For someone in their 60s, maintaining a steady cash flow, preserving wealth, and earning real returns are critical. Using systematic withdrawal plans (SWPs) allows retirees to withdraw a fixed amount regularly while keeping the rest of the corpus invested in equity and debt funds.

SWPs offer a reasonable standard of living and the monthly costs associated with retirement. “One can create a monthly SWP by giving instructions on his equity fund corpus for the said amount. To enjoy the benefits of SWP one must be careful with a reasonable withdrawal rate. He should stay disciplined on withdrawals. The withdrawal rate can be adjusted based on investment return/real rate of return from his portfolio,” says Krishna.

Also Read: Centre To Unveil New Simplified Pension Application Form For Retiring Employees

“Create two baskets, one for consumption purposes. This can be in debt funds or arbitrage funds and the rest in equity. Keep two to three years’ expenses separately in arbitrage or debt and let the portfolio grow and withdraw every 3.5 years rather than disturbing the portfolio with SWPs. Also, keep funds separately for contingencies,” says Muni.

The below example can serve as a guide.

• Individual has a corpus of Rs 3 crore
• Per month expenses are Rs 50,000

You should ideally park your money in the manner below:

Source: Anand Rathi