After retirement, an employee stops their monthly SIP, since the rupee cost averaging does not apply anymore, so should a retired person remain invested in Mutual Funds?
Your question is jumbled. There are two aspects here:
- Continue with your SIP
- Remain invested with the corpus => I will focus on this.
One should not remain invested in equity post retirement is a myth. Assuming life expectancy to be 80 yrs, you can have a 5 * 6 strategy.
Equity markets go in a cycle, there may be certain nos of years where your investments will give 0 to negative returns. So, this is how I plan to go about. With 60 yrs as retirement age, at the age of 55, withdraw your currently expenses * 6. So, for yearly expenses of 5 lakhs/yr ( this is my current yearly expenses ), withdraw 30 Lakhs from your corpus. Create 5 different FDs as follows:
2 * 5 Lakhs 5 yrs FD, maturing at the age of 60
1 * 5 Lakhs 6 yrs FD maturing at the age of 61
1 * 5 Lakhs 7 yrs FD maturing at the age of 62
1 * 5 Lakhs 8 yrs FD maturing at the age of 63
1 * 5 Lakhs 9 yrs FD maturing at the age of 64
The first two FDs maturing at the age of 60, will serve for the inflated adjusted expenses ( assuming interest earned is approx = inflation ) and additional corpus for unforeseen expenses over the period of next 5 yrs. The amount received from the 2nd FD maturing at the age of 60 should be kept in a separate account and that amount should be used only for emergency/unforeseen expenses. This can be kept in a Money Multiplier account ( ICICI provides and equivalent of other banks ) .
At the age of 60, 65, 70, 75 repeat the same process, based on the yearly expenses at that age. So, basically you withdraw your expenses 5 times for 6 years expenses.
This way you don’t panic about market fluctuations and don’t withdraw too early and loose the benefits of equity compounding. Basically, you divide and rule.
Lot of advisors, well wishers may laugh on you for remaining invested in equity post retirement, but if you know your yearly expenses, you can go in the above manner.