How to Invest a Retirement corpus of 1 Crore for a Monthly Income in India?

Planning for retirement involves building a corpus during your working years to secure your future. But where to invest 1 crore to get monthly income or how to invest 1 crore of retirement corpus wisely?

Ensuring that your hard-earned savings provide consistent support after your active income stops can be challenging.

A well-structured retirement corpus serves as a financial safety net, covering essentials, medical expenses, and lifestyle goals. The key lies in managing this wealth effectively.

Where to invest money after retirement for monthly income while ensuring it lasts your lifetime? Let’s explore strategies to make your retirement savings work effectively for you.

Table of Contents

• Conservative Options to Park Retirement Corpus
• Investment Options to Avoid for Retirees
• Practical scenario 1: Conservative portfolio
• Practical Scenario 2: Diversified (Ideal) Investment Allocation
• Conclusion: Ideal Strategy for Investing Retirement Corpus

Conservative Options to Park Retirement Corpus

In India, most retirees gravitate toward conservative investment strategies that prioritize steady income and low risk. But what are the best options to safeguard your savings while ensuring regular returns?

Let’s take a closer look at some popular choices tailored for financial security in your golden years.

1. Senior Citizens’ Savings Scheme (SCSS)

A government-backed scheme with a 5-year lock-in, extendable by 3 years, SCSS currently offers 8.2% per annum. It provides quarterly interest payouts, making it a reliable option for regular income. While the principal is secure, the interest income is taxable.

2. Fixed Deposits (FDs)

Bank and post office fixed deposits are safe investments offering predictable returns. Current interest rates range from 6% to 7% per annum, with special schemes for senior citizens offering up to 7.5%. Retirees often ladder FDs to ensure liquidity and mitigate reinvestment risk.

Corporate deposits often provide higher interest rates than bank fixed deposits (FDs), making them attractive to some investors. However, retirees should approach these investments cautiously due to several risks. Retirees generally have lower risk tolerance, and preservation of capital often takes precedence over higher returns.

3. Rental Income

Retirees owning real estate may earn regular income through rent. This option provides steady cash flow but comes with challenges like tenant management, property upkeep, and occasional vacancies.

4. Post Office Monthly Income Scheme (POMIS)

Designed for regular monthly payouts, POMIS is a 5-year investment scheme offering 7.6% per annum. While safe and reliable, the maximum investment is capped at ₹9 lakh for single accounts and ₹15 lakh for joint accounts.

5. RBI Floating Rate Savings Bonds

These bonds offer biannual interest payouts linked to the prevailing National Savings Certificate (NSC) rate, with a current rate of 8.05% per annum. The floating rate ensures returns are adjusted to market conditions, providing protection against inflation. However, the 7-year lock-in period restricts liquidity, making them suitable only for those who don’t anticipate immediate cash needs.

6. Pradhan Mantri Vaya Vandana Yojana (PMVVY) (available for investment up to 31 Mar 2023)

Exclusively for senior citizens, PMVVY offers assured returns of 7.4% per annum for a 10-year tenure. It provides guaranteed income but lacks flexibility once the funds are locked in.

7. Annuity Plans

Insurance companies offer these plans for a steady income over a lifetime or fixed period. Annuity amount depends on the chosen options like Immediate or deferred annuities, with or without return of purchase price, Single or joint life. Income is taxable, and returns are generally lower compared to other options, but they ensure lifelong payouts.

Investment Options to Avoid for Retirees

Next, let’s explore how a combination of these investment options can work in a practical retirement scenario. But before diving into the calculations, it’s essential to recognize some options that may not be suitable for retirees.

Take annuity plans, for example. While they offer a guaranteed income, they come with notable drawbacks. The biggest issue?

Their lack of flexibility. Once your corpus is locked into an annuity, it’s tied up with no access to funds for emergencies or other personal needs. The payout structure is also fixed, and the remaining corpus is only available to your nominee after your passing, rather than being accessible to you during your lifetime.

For these reasons, we generally advise against pre-packaged pension or annuity plans for retirement. Additionally, it’s worth noting that the PMVVY scheme is currently unavailable for investment.

When planning for retirement, retirees should prioritize options that offer safety and reliable income. While corporate deposits might seem appealing due to their slightly higher returns, they carry risks that often outweigh the potential benefits.

In comparison, government-backed schemes or insured bank deposits provide a more secure foundation for a comfortable retirement. Why take unnecessary risks when stability is within reach?

Practical scenario 1: Conservative portfolio

To illustrate the potential outcome of a conservative investment strategy, consider a ₹1 crore retirement corpus allocated among the following instruments:

Retirement Corpus	₹ 1,00,00,000
Annual Withdrawal	₹ 5,00,000
Annual Increment	6%
Returns (Weighted Average)	8%

SCSS	₹ 30,00,000	8.20%
POMIS	₹ 15,00,000	7.40%
RBI Floating rate bond	₹ 15,00,000	8.05%
Bank FD	₹ 40,00,000	7%
weighted average returns		8%

This allocation provides a weighted average return of 8% per annum. With an annual withdrawal of ₹5 lakh, increasing by 6% annually to account for inflation, the corpus appears sustainable initially. However, as withdrawals increase over time, the corpus starts to deplete.

Age	Opening balance	Annual Withdrawal	Closing balance
61	₹ 1,00,00,000	₹ 5,00,000	₹ 1,02,60,000
62	₹ 1,02,60,000	₹ 5,30,000	₹ 1,05,08,400
63	₹ 1,05,08,400	₹ 5,61,800	₹ 1,07,42,328
64	₹ 1,07,42,328	₹ 5,95,508	₹ 1,09,58,566
65	₹ 1,09,58,566	₹ 6,31,238	₹ 1,11,53,513
66	₹ 1,11,53,513	₹ 6,69,113	₹ 1,13,23,153
67	₹ 1,13,23,153	₹ 7,09,260	₹ 1,14,63,004
68	₹ 1,14,63,004	₹ 7,51,815	₹ 1,15,68,084
69	₹ 1,15,68,084	₹ 7,96,924	₹ 1,16,32,853
70	₹ 1,16,32,853	₹ 8,44,739	₹ 1,16,51,163
71	₹ 1,16,51,163	₹ 8,95,424	₹ 1,16,16,198
72	₹ 1,16,16,198	₹ 9,49,149	₹ 1,15,20,413
73	₹ 1,15,20,413	₹ 10,06,098	₹ 1,13,55,460
74	₹ 1,13,55,460	₹ 10,66,464	₹ 1,11,12,115
75	₹ 1,11,12,115	₹ 11,30,452	₹ 1,07,80,196
76	₹ 1,07,80,196	₹ 11,98,279	₹ 1,03,48,471
77	₹ 1,03,48,471	₹ 12,70,176	₹ 98,04,558
78	₹ 98,04,558	₹ 13,46,386	₹ 91,34,826
79	₹ 91,34,826	₹ 14,27,170	₹ 83,24,269
80	₹ 83,24,269	₹ 15,12,800	₹ 73,56,386
81	₹ 73,56,386	₹ 16,03,568	₹ 62,13,044
82	₹ 62,13,044	₹ 16,99,782	₹ 48,74,323
83	₹ 48,74,323	₹ 18,01,769	₹ 33,18,359
84	₹ 33,18,359	₹ 19,09,875	₹ 15,21,163
85	₹ 15,21,163	₹ 20,24,467	₹ -5,43,569
86	₹ -5,43,569

The retirement corpus turns negative, leaving a shortfall of ₹5.43 lakh by the age of 85.

While this approach provides a predictable income and preserves capital in the early years, it faces significant challenges:

1. Erosion Due to Inflation: Despite a steady return, rising withdrawals outpace the portfolio’s growth, depleting the corpus.
2. No Long-Term Sustainability: This strategy fails to last throughout retirement, leaving retirees vulnerable in their later years.

Although these conservative options may seem comfortable initially, they may not provide a sustainable solution in the long run. In the next section, we’ll explore strategies to overcome these shortcomings and ensure the corpus lasts a lifetime.

Practical Scenario 2: Diversified (Ideal) Investment Allocation

Here’s a detailed split of the ₹1 crore investment for the retirement corpus, ensuring both regular income and capital appreciation:

Retirement Corpus	₹ 1,00,00,000
Annual Withdrawal	₹ 5,00,000
Annual Increment	6%
SCSS	₹ 30,00,000
Liquid Funds	3,00,000
Equity funds	33,00,000
Debt funds	34,00,000

Split of ₹1 Crore Investment:

i.) Senior Citizen Savings Scheme (SCSS): ₹30,00,000

• This provides stable and predictable interest income.
• Current SCSS interest rate: 8.2% (subject to change).

ii.)Liquid Fund: ₹3,00,000

• This acts as a buffer for the first year’s expenses, ensuring immediate liquidity.
• Can be used entirely in the first year for living expenses, minimizing early withdrawals from other investments.

iii.) Debt Fund: ₹34,00,000

• This provides stability and ensures periodic income (via Systematic Withdrawal Plan – SWP allow periodic withdrawals from investment) to supplement SCSS interest.
• Moderate growth potential with lower risk compared to equity funds.

iv.) Equity Fund: ₹33,00,000

• This portion is allocated for long-term capital appreciation.
• It remains untouched for the initial years to allow compounding.

In the first year of retirement, the living expenses amount to ₹3,00,000, which are fully funded from the liquid fund. During this period, no withdrawals are made from either debt or equity funds.

To supplement income, the interest earned from the Senior Citizens’ Savings Scheme (SCSS) — ₹2,46,000 annually (calculated at 8.2% on ₹30 lakh) — provides additional financial support.

From the second year onward, the strategy shifts to creating a sustainable income stream that adjusts for inflation, while balancing growth with stability. The steady interest income of ₹2,46,000 from the SCSS continues to play a central role in this plan.

Any gap in expenses is covered by Systematic Withdrawal Plans (SWP) from the debt fund, with withdrawals increasing each year to account for inflation.

To keep the retirement corpus growing and manage risk effectively, a periodic rebalancing of equity and debt funds is done. This involves transferring a portion of the equity fund’s gains into debt funds, ensuring the debt pool remains adequate to support withdrawals, while also reducing portfolio volatility.

This disciplined approach helps maintain an inflation-adjusted income throughout retirement. For example, in the second year (at age 62), total withdrawals amount to ₹5,30,000. By the 20th year (at age 80), the withdrawal increases to ₹15 Lakhs, adjusted for inflation.

Despite these withdrawals, the corpus continues to grow steadily and remains well-balanced, thanks to the regular equity-to-debt rebalancing and strategic financial management.

Isn’t this approach a secure way to ensure your wealth works for you, even in your later years?

The financial strategy prioritizes sustainability by harnessing capital growth from equity funds, which remain untouched during the early years of retirement.

As retirement progresses, particularly by age 75, the remaining equity portfolio is fully transitioned into debt funds, ensuring stability in the later years. This shift reduces risk while continuing to support regular withdrawals and meet ongoing financial needs.

By age 85, the corpus remains strong, consisting of ₹61 lakhs in debt funds and ₹30 lakhs in the SCSS principal, which continues to generate consistent interest income.

This results in a total corpus of ₹91 lakhs, providing financial security throughout retirement and even leaving behind a legacy for the future.

While equity investments are volatile by nature, the allocation to equities and the timing of transitioning funds to debt can be adjusted based on the investor’s risk tolerance.

The strategy outlined here demonstrates a thoughtful approach to securing a stable and sustainable income stream during retirement. Isn’t this the kind of financial plan that offers peace of mind, both today and for the years to come?

Advantages of a Diversified Investment Portfolio:

1. Regular Income: SCSS and SWP meet yearly living expenses.
2. Capital Appreciation: Equity growth adds to the corpus for future stability.
3. Stability in Later Years: A full shift to debt ensures minimal risk after age 75.

Conclusion: Ideal Strategy for Investing Retirement Corpus

An effective retirement investment strategy strikes a balance between stability, growth, and income. By diversifying investments across equity, debt, and secure instruments like SCSS and RBI Bonds, retirees can enjoy regular income, protect against inflation, and achieve capital growth.

Periodic rebalancing between equity and debt further helps in managing risks while ensuring the longevity of the corpus. This well-planned approach not only sustains financial security throughout retirement but also guarantees peace of mind.

After all, isn’t the ultimate goal of retirement to enjoy your later years with confidence and financial independence?