How the “portfolio of compartments strategy” helps seniors in retirement

Due to declining bank term deposit (FD) rates and the variable nature of small savings plans interest rates, senior citizens find it difficult to beat inflation from their traditional investment options. According to tax and investment experts, it is time for the elderly to follow a “portfolio of compartments strategy” that provides emergency funds, regular income, equilibrium income and investment options for beat inflation.

Elaborating on the “Compartment Portfolio Strategy” for Seniors, Manikaran Singhal, Founder of godmoneying.com said: “The Compartment Portfolio Strategy helps a senior meet their financial needs after retirement. It provides for an emergency fund, a regular income, a balanced income. and funds to beat inflation for retirees. For emergency funds one needs liquidity in one’s wallet and in the case of the elderly it is more important, therefore investing in FD bank should be continued. For regular income, programs like Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office MIS Scheme, etc. are recommended. But, to beat inflation, long term debt mutual funds are advised.

Asking seniors to invest in debt mutual funds with a horizon of more than 3 years, Jitendra Solanki, a tax and investment expert registered at SEBI, said: “Debt mutual funds with a horizon of more than 3 years helps them at about 5.5% to 6%. “

Solanki said that in debt mutual funds with a 3-year horizon, an investor can expect to earn a return of at least 7%. If we disregard the 20 percent LTCG with the indexing benefit available in debt mutual funds, the net return on the after-tax income payment would drop by about 6 percent.

So it’s high time for seniors to follow a “bucket portfolio strategy” and prepare financially to meet all kinds of post-retirement financial needs.

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Don F. Davis

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