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I waited for long for big correction to adjust my debt heavy portfolio. Finally took the plunge during last quarter, now it is at 57:43. I will try to maintain the ratio around the same.

This is critical. Haven't you figured out this during the last 2 year WFH?

I have one basic question (if you don't mind answering). Are you already getting a fixed monthly income (apart from your regular income) through which you can manage your monthly expenses after your retirement when your regular income stops?
Or, are you planning to generate that fixed monthly income from the asset that you mentioned above?
The reason why I am asking this is, even i am into late 40s and even I have been planning for an early retirement since last 5+ years. But I don't think I am still there as far as generating fixed monthly income is concerned.
I do think that I have created enough corpus amount that can meet my 'other' expenses (like, children's education, marriage, adhoc health expenses, etc).

Instead of doing a proper re-balance, I was just doing all the new investments into Equity for the last two years. But still, I am only at 43:57. I am thinking to do the rebalance now when I have some time due to WFH.

IMO the current situation cannot be treated as the norm. Once things get back to a pre-pandemic state, won't the way you spend time (and money) change? Instead of Netflix, you will go to a theater; instead of watching travel vlogs, you will travel.

And this is why I will not take the number given by retirement planners at face value. If my current monthly expense is X, the retirement planning tool adjusts X for inflation and the number of years and arrives at a corpus value of say 200X. But, if I were to retire tomorrow, my monthly expense will shoot from X to 2X or 3X because I will have a ton of free time and won't know what to do. Plus, a person retiring at 60 will be past most of his/her milestones. But a person in his 40s may still have many goals like a dream retirement house, children's education\marriage, world travel, expensive cars, etc, none of which the planning tool can predict.

This is my first post in this thread so let me put a point which I consider is the most important while planning for retirement, whether early or at a standard age of 58/60. It is impossible to plan for retirement till you know your “current expenses” to the last rupee. Track/note every rupee that goes out of your pocket. This figure will have to be used to calculate your future expenses.

Now coming to your question.
I am assuming that this asset allocation is purely for your retirement and other goals like child marriage, higher education etc have been taken care of separately.
You have also not clarified whether the RE is generating any rent or not.

Considering that you are very near to your retirement goal it is not advisable to have substantial portfolio in Equity assets. You need to divide your portfolio in buckets. Each bucket corresponds to a decade or 15 years of your future life.

Lets say Bucket 1 (B1) corresponds to your life of 10 years between 50Y & 60Y. This bucket has to be purely debt as it will be the first to be utilised.
B2 corresponds to your life of 10 years between 60Y & 70Y,
B3 corresponds to your life of 10 years between 70Y & 80Y, and finally,
B4 corresponds to your life of 10 years between 80Y & 90Y.
Each of these buckets will have separate asset allocation with maximum equity in B4.
You may increase the number of years each bucket represents to 15 to decrease the complexity.
For more details about bucket strategy you may refer freefincal.com

Also do not rely on western bloggers who recommend 25X for retirement (X= annual expense in the year of retirement.). My suggestion is to target at least 50X corpus before hanging the boots to avoid nasty surprises at later stage in life where you will not be able to do anything if corpus gets exhausted.

I believe, unless we have a good handle on the expense and income heads, there will be no basis for a retirement plan.

In the example you cite. if one needs to spend 2x of current expenses to utilize time, the retirement plan should factor in the 2x as the expense. And for milestone expenses, these should also be planned over above the retirement corpus.
Try an app like https://projectifi.io , they have a trial where you could add one off expenses etc. Of course on could use a simple excel to arrive at the same.

Guys, after reading your responses, I have to admit - I had not given so much thought or planning onto it until now. All I had done till now was to have a ballpark figure in mind and work towards it. After living elsewhere for most of my working years, am back in my hometown after building a house in my ancestral land (both not factored in in the calculations).

Although I had been thinking about retirement for quite some time, the hurry is that my health is waning and I want some me time before the inevitable happens. So it is not that I have a ton of assets and I can go into retirement thinking that I have everything figured out. As I said earlier my targets were modest and all I want is a less stressful life and more time with family.

To arrive at the amount I needed for retirement I just took my monthly expenses and multiplied it by 12x30 (although I don't really expect to live so long). Here am making several assumptions - like we keep the same standard of living, and asset appreciation (interest etc) will keep up with inflation.

This I like, but don't you think that at the point I make the retirement, there should be a sharp jump towards the debt side? Would something like age-5 before retirement and age+5 after retirement make sense? And why shouldn't real estate be considered in the debt side? We have to put it in either buckets and it does not fit in the equity bucket right?
My salary has been pretty stagnant the last 5 years, and if I remove my EMIs and SIPs we (a family of 4) get by with about 60K per month. Put in some buffer and I think 80K should get us by. Here my assumption is that interest will keep up with inflation.
I plan to keep the expenses towards education in a separate corpus and not touch it except for the intended purpose. Am not thinking about their marriage at all and our parents are good on their own. There are loans, which I will pay off.
I have some interests that I may want to pursue, but am a lazy bum, so essentially I am yet to identify my calling. I don't want to get back to the kind of routine I have with my current work, where I worry about the next meeting, that PPT I have to finish or the presentation I have to give. So it is fine if I don't do anything as long as I don't get bored. lol:
Quite the contrary - I haven't had much of a free time ever since WFH started. Things were much easier pre-covid when we didn't have to "prove' that we are indeed working.
Good Q. I am getting rent from the apartment I have in Chennai and expect that it will continue for some time. Eventually I plan to sell it off.
I think if I wait for that day where my assets will generate monthly income for me to retire, that day may never arrive. For ex, if I plan for only rental income, to get 80K in monthly rent I may have to buy four 1 crore apartments. Am simply planning to "eat away" all my assets hoping that I don't outlive them.
We pretty much live hand to mouth. Every rupee that comes in is spent by the month end. Had been like this for several years now.Thank you for this. And thank you for making me realize that retirement planning is not just about having money in the bank.
I see your reasoning. Make sense because things are more unpredictable here in India. What I am hoping that the ancestral land serves as a cushion if the original plans go haywire.

Nah. Equities (especially diversified stock portfolio or mutual fund) do NOT carry much capital loss risk over the long term. That's because money sloshing around in the economy has only 3 or 4 places to go:

- Equities
- Real estate
- Banks & corporate deposits
- Gold

If money flees equities, it has to go somewhere (very likely bank FDs). But when banks & corporates are flush with funds, they will slash interest rates making investment in FDs unattractive. Ditto with real estate - too much inflows into this investment avenue will make it unattractive. Money will eventually flow back into equities.

Equity risk is primarily volatility risk (huge up and down movement). The target equity/debt mix is more than enough to handle equity volatility risk.

Sure, that is fine. Whatever you are comfortable with. It is not a "line in the sand" kind of rule as such.

Real estate is real estate - not debt or equity. It is considered a separate asset class.

Something I completely missed to mention earlier is NPS (National Pension System). It is similar to MF but in a different way because it's more secured.

Plus, 60% of the corpus accumulated is tax-free during retirement and the rest 40% will be held by the PFM (Pension Fund Manager) to provide you a pension. The remaining 40% can also be withdrawn at 100% of value upon your death by your nominees.

This is an excellent instrument to off-load your equities into. What's good is that there is an "Auto" asset allocation option in NPS with which the PFM will do the portfolio rebalancing on your behalf, depending on your age.

Please note that the net returns are somewhere around 10% so quite low compared to MF. However, this instrument is secure since it's owned by Government. And far better than FD.

The amount invested in NPS can also be used to claim a rebate of Rs. 50000 u/s 80CCD in addition to the Rs. 1.5L that you can currently claim as rebate u/s. 80C.

The retirement age in NPS is considered to be 60 years. So you have a little over a decade to start investing there.

For the young chaps out here reading - invest in NPS. I should've listened to my mother, she has been telling me for half a decade now. I finally started when I turned 30 last month.

Is it really more secure than MF? Considering the underlying investment for NPS is also in MFs.

The tax benefits aside, my personal preference among the two would be direct MF due to the flexibility and liquidity it provides. Only if one does not have the discipline to regularly invest and not liquidate unnecessarily, should they look at NPS.

Underlying investment is spread across multiple asset classes, primarily - Equity, Government Securities and Corporate Bonds.

Every instrument you invest in, irrespective of type, ultimately goes into the above asset classes. So just because there is market exposure doesn't mean they are unsecure. Also, we shouldn't confuse between market risk and security.

The security comes from the fact that Government would be ready to open their exchequer in case of exigencies. Because crores of people are relying on these funds for their livelihood. And the NPS fund is regulated by a government body.

The same will not be applicable for an AMC.

Investment is about portfolio management. That's where the discipline is. Investing only in MF isn't a sound strategy either.

In no way I was implying that NPS is the only way to invest. NPS is one of them and best suited for "retirement fund". One needs to diversify their investment depending on their requirements, that goes without saying.

For milestones, like let's say a home purchase, MF or Equity would be more suited to achieve the goal faster.

Purely for my retirement, I'd want to consolidate funds that are untouchable, has tax benefits and secured by the government. This is my backup fund for retirement if I completely mess up.

How do you feel about restriction on maturity, the fact that you can only withdraw 60% and rest has to be converted to annuity? I shy away from government schemes because it depends on whims and fancies of the government. They can change the policies any time they want.

Can you please explain what you mean by 'net returns'? Meaning, factoring the tax benefit on the upfront contribution to arrive at the return?

I have been contribution to NPS for quite some time now. Tax benefits aside, the returns are not at par with the FD rate of interest. Factoring inflation, the returns are below par. Fund manager shows a return using the XIRR method, which is not the 'actual' return that I expected. And, considering that I am on the verge of exit, the annuity quotes are joke. Felt the option to continue (extend) contribution was better than exercising option to withdraw. My experience with 'pension/annuity' schemes is that the actual monthly pay-out at the time of maturity is much lesser what was envisaged when you enrolled in the scheme.


PPF, NSC, SCSS et al are among the top 'debt' investment schemes of the Government. True, the Govt. is syncing the interest rates on these with the market rates, but the fact is that these are 'sovereign' debts yielding higher interest than bank deposits.

Both PF and NPS are basically 'trusts' and Govt. will have to cough up the amount if they have to retain public confidence. (How many remember the US64 scheme & the genesis of UTI Bank which is now Axis Bank?). Any way, the some of the money you invest - other than equity - will eventually find its way into Govt. bonds and securities...... (LIC is one of the largest holders of Govt. bonds!)

It is a valid question. However, the policies could swing both ways. In fact, financial regulatory norms have only seen relaxation historically.

Please see this article from on relaxation in withdrawal limit.

Partial withdrawals for higher education and investment to new business, which didn't exist before, were also introduced in 2018.

These relaxations may be puny or may feel little too less. However, given the historical trend I would hinge more on relaxation than restriction in these norms.

Even if the regulation continues as is, with 40% locked in for annuities, this investment vehicle is great for the tax benefits it offers short-term. I exhaust my 80C with just my PF contribution that goes out of my pay. And I don't have a housing loan to reduce my tax liability. Here, NPS plays a significant role since I can reduce my taxable income by an additional 50k. This is significant for me. The tax saved now can be put into swing trades or mutual funds to earn more.

Furthermore, the annuity rates are currently comparable to the FD interest rates for senior citizens. And for someone who has no other income source to rely on, the annuity is a great fallback option.

You have to look at NPS as a fallback retirement plan where the funds are secure, you have tax benefits and is hassle-free. My current investment split is something like below:

70% -> Equity instruments like Stock and MF
20% -> Debt instruments
10% -> Secure debt instruments - PPF and NPS (in addition to my investment in EPF, not counting this since it goes out of my salary itself)

And of course, as I get older I'll rebalance the above portfolio.

What this allows is that even if everything fails, I'll still have the 10% that I kept investing as my retirement fund. Sure it comes currently with restrictions but it is secure. Retirement fund should be about that.

Sorry, I meant aggregated returns. Since the PFM will invest in multiple asset classes depending on your age (in the Auto option), you have to consider the aggregated return depending on the investment style (aggressive, moderate, conservative).

Interesting that you say your returns aren't at par with FD. HDFC, for example, gives a 1-year return of ~22% for Equity and north of 9% for both Government and Corporate bonds. And these are their latest reported numbers. The aggregated return should therefore be higher than FD.

Please check which style of investment you're following. If you're below 40 now, I'd suggest going with aggressive style. The default NPS investment style is moderate.

Can you please elaborate on what method you are using to calculate the returns?
My understanding has been that since NPS , for most employees, will be a monthly investment for which the XIRR is a good measure.

Also, are the annuity quotes you got below the RBI floating bond rates?

He is referring to the case where you make contributions to NPS on your own. The employer may not offer NPS as an investment avenue and hence you have to contribute on your own only and avail the extra 50K tax exemption.