Upon retirement, it is common to receive a lump sum amount as a retirement corpus from sources such as a provident fund (PF) account or investments in pension schemes. However, it is equally important to secure a regular cash flow for the future. Regular cash flow not only provides financial stability but also has a psychological impact, as individuals tend to plan their expenses based on a consistent income stream. To sustain a regular cash flow after retirement, consider the options discussed here.

Choose The Right Investment Product For Regular Cash Flow

You must choose the right investment product for generating regular cash flow after your retirement. A lower return can put you under financial stress, and you may end up using the retirement corpus to meet your expenses. There are plenty of investment options available for the regular return; for example, you can invest in the bank fixed deposits, SCSS, PMVVY, etc. Prefer investments which are tax efficient and offer a higher return than the prevailing inflation rate.

Mutual Fund SWP

If the mutual fund investment done in the past has grown to a significant amount, a systematic withdrawal Plan (SWP) can be used to redeem a certain fixed amount every month. It will ensure a continuous cash flow every month. SWP will not only provide a cash flow but will also ensure that the remaining amount invested keeps earning returns.

Reverse Mortgage Loan

Using the reverse mortgage loan (RML), you can create cash flow by using the equity value of your property (usually home). The bank assigns a value to your property and agrees to pay it every month in instalments, or you can take a small portion in lumpsum along with regular instalments. You can use this option after the age of 60.

The bank decides on the loan based on the condition and location of the property. Usually, the loan-to-value ratio is 60% to 80%. This means if your property is valued at 1 crore, the bank will provide you with a loan of 60 lakhs to 80 lakhs. The money is paid to the borrower in regular monthly instalments, which is known as reverse EMI. The tenure can vary from 10 years to 20 years, depending upon the individual banks’ policies.

Reducing Existing Expenses

Reducing expenses can help retirees to reduce the financial challenges caused due to lack of adequate cash flow. Senior citizen people can reduce their expenses by shifting to a smaller home or staying in a senior citizen living, avoiding new loans and saving taxes with effective tax planning.

Regular cash flows are important in any stage of life as it gives a person a sense of security. It is important that this is maintained even after retirement so that life goes on uninterrupted.

The author is an Independent Financial Journalist