I was recently quoted in Economic Times WEALTH (30 June – 6 July 2025) in the Q&A section, where a panel of experts answers readers’ questions related to various aspects of their personal finances.
The exact question and the answer –
Here is the text version of the query and the reply –
Q – I am 50 years old with a current corpus of Rs 3.5 crore, allocated as follows: 85% in equity (split equally between stocks and mutual funds), 5% in debt, and 10% in gold. I plan to continue working and investing ₹3 lakh per month via SIPs for the next two years. At age 52, I intend to stop working and start receiving Rs 1 lakh per month through SWPs to cover monthly expenses. Additionally, I will need ₹50 lakh for my son’s education. Given these goals, where should I invest my SIPs over the next two years?
A – With 85% equity and 5% debt, your portfolio is high-risk, suitable when far from retirement, but risky with only two years left. Sequence of return risk necessitates gradually or immediately reducing equity to 60–65% by retirement. Allocating ₹50 lakh for your son’s education leaves Rs 3 crore plus Rs 72 lakh in future contributions. Your Rs 1 lakh monthly withdrawal (~3.2% rate) supports portfolio longevity. For education needs within 3–4 years, keep 1–2 years’ expenses in debt instruments. Direct most of your ₹3 lakh/month savings into low-risk debt funds or RBI FRBs for a balanced retirement portfolio, prioritising debt for SWPs over equity. Consult a financial adviser to align with your risk profile.
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And I also had an expanded view on the same (which isn’t published in the newspaper but might be of help to many who would want to understand about it). Sharing the same below:
A – With 85% in equity and a minuscule 5% in debt, it seems you have a fairly high risk appetite and, more importantly, understand how it can play out across various scenarios. While a high-equity allocation is still acceptable when one is several years away from retirement, this can be a high-risk strategy (because of sequence of return risk) in your case, given that (chosen) retirement for you, is in the next 2 years.
So prudent (retirement) portfolio risk management demands that you reduce your equity allocation as you transition towards your retirement. How much should be in equity will depend on the actual risk profile. But anything more than 60-65% equity during the post-retirement phase can lead to very volatile and uncomfortable real-world outcomes, even though theoretically, a high equity portfolio is expected to do well for longer term. So, it’s best to get in touch with an investment advisor, who, looking at the actual detailed data, would be in a better position to suggest a customized approach.
I am specifically not commenting on the type/category of equity funds for you, as with 85% equity allocation, I am sure you already know which categories are suitable for you and how they stack up on the risk-return matrix.
That said, you wish to generate Rs 1 lakh monthly / Rs 12 lakh yearly from this corpus (assuming there are no other income sources like pension, rental, etc.). Leaving aside Rs 50 lakh for son’s education, the residual corpus of Rs 3 Cr (today) + additional Rs 72 lakh (Rs 3 lakh monthly contribution for the next 2 years), means an approx. withdrawal rate of about 3.2% (in present value terms) – which is fairly conservative and reasonable. This controlled withdrawal rate gives comfort and ensures the longevity of the retirement portfolio.
The timeline for son’s higher education isn’t provided, but if it’s within the next 3-4 years, then best to have a low equity allocation for that bucket. At least keep 1-2 years’ worth of college fees in debt instruments if the goal is near.
The answer to your question about – where to invest Rs 3 lakh monthly for the next 2 years, depends on whether you want to reduce your equity allocation (as suggested earlier due to approaching retirement) in one shot now itself, or want to do it gradually over the next 2 years. Given the low debt allocation of just 5%, a major chunk of your Rs 3 lakh monthly surplus should now go towards debt instruments (like in a proven, non-adventurous, low-risk, all-weather portfolio of debt funds, RBI FRBs, etc.) to scale it up as you head closer to retirement. That way, some extra buffer can be created to source your SWP from debt instruments. Many feel SWP can be done from pure equity, too, but best not to rely on that approach as you try to transition to retirement in a prudent, risk-optimised manner.
The details of your health insurance are not provided. If you don’t have one, please ensure you get coverage of at least Rs 25 lakh if not more. Or if you already have a smaller base cover, then you can further enhance it with super-top-ups for low-probability-high-impact larger bills.
