Father's Day 2025: How to ensure financial security for your father
gifts
and give your dad something truly meaningful—financial security. While traditional gifts are great gestures, helping your father plan for or strengthen his retirement can offer peace of mind that lasts far beyond this one day.
ETMutualFunds reached out to an expert to understand how to build the portfolio allocation and plan
financial security
for the fathers.
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Approaching retirement
Retirement, after all, is a stage of life that demands smart
financial planning
. Many from the older generation have long relied on fixed deposits and similar instruments for post-retirement income. But with inflation eating into post-tax returns, such traditional savings avenues may no longer be sufficient.
An expert highlights that planning for retirement is crucial because, after a certain age, regular income stops, but expenses continue, often increasing due to inflation and healthcare costs.
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Arjun Guha Thakurta, Executive Director at Anand Rathi Wealth Limited shares four steps to ensure financial security post retirement and the mistakes one should avoid post retirement.
While sharing the steps to ensure financial security, the expert mentions that an investor should reassess his after-retirement financial goals and expenses for example household needs, healthcare, travel or support for family. Secondly, investors should have a plan for accumulated wealth to be invested in income generating and capital preservating assets.
Thirdly, keep a separate fund for 6 to 12 months of expenses in a safe option like liquid fund or savings account as this helps to handle unexpected costs without disturbing the main investments. And lastly, one should keep checking their financial plan every year or after any major change in your life as this will help you to stay aligned with your goals and adjust to new needs.
Many investors look for the best or top
mutual funds
to invest without considering their risk appetite, investment horizon, and goals which often results in loss of capital, underperformance in the portfolio, or unfulfilment of main objective.
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Thakurta shares the mistakes that one should avoid while planning post 60 which includes planning with today's value of money can be misleading as inflation eats into your savings over time, so always adjust your goals accordingly.
For example, if a person wants to retire today with Rs 2 crore it will not be the same amount after 30 years as inflation will have a greater role to play. The target amount changes to Rs 11 crore post adjusted of inflation.
Secondly, it is not recommended to put all your money in one place as one should invest in assets with low correlation to beat inflation and can construct the portfolio in a manner which is proper debt to equity mix to beat inflation while keeping risk low. And lastly, medical expenses can rise quickly in old age so having good health insurance and a separate medical fund is a must to avoid financial stress.
There are many investment options available to make investments but an investor should always choose the correct avenue based on their risk appetite, investment horizon, and goals.
For fathers looking for stable income and capital safety, the expert shares that there are several reliable investment options such as bank fixed deposits (FDs) remain a popular choice, especially among retirees, as they provide assured returns and flexibility in tenure.
But FD returns may not always beat inflation so another option for senior citizens is the Senior Citizen Saving Scheme (SCSS), a government-backed plan designed specifically for individuals above 60 which offers attractive interest rates, quarterly payouts, and tax benefits under Section 80C in old tax regime but not suitable for an individual opting for New Tax regime.
There are annuity plans offered by insurance companies for retirement planning and such insurance plans come with a lock in period and usually fail to deliver inflation-beating returns so the investor should not look at insurance as an investment product and should go for the term plan, the expert adviced.
He further adds that investing in pure debt mutual funds for retirement may seem like a safe choice, they don't usually deliver high returns, and hence are less effective for long-term wealth creation and more importantly, after the recent tax changes, debt mutual funds are no longer eligible for indexation benefits. 'Now, gains are taxed as short-term capital gains at your slab rate, regardless of holding period. This reduces their post-tax efficiency, especially for retirees in higher tax brackets,' Thakurta shared with ETMutualFuds.
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Investment in equity mutual funds through
SIP
and
SWP
The expert believes that investing in equity mutual funds through SIP (Systematic Investment Plan) is a smart way to build wealth for retirement as SIPs allow you to invest small amounts regularly in mutual funds that invest in stocks, which can potentially offer annual returns of 13 to 14% over the long term.
Once you have built a sizable corpus, you can switch to an SWP (Systematic Withdrawal Plan) to withdraw a fixed amount every month as retirement income and this approach helps provide regular cash flow while the remaining corpus continues to grow, Thakurta said.
'Retirement planning is a long term journey and choosing diversified equity mutual funds for retirement planning is ideal, as they help to beat inflation and generate long-term wealth and can be a powerful vehicle to help you retire rich.'
This is where mutual funds can play a powerful role. They offer the flexibility and diversity needed to manage money effectively at every stage of life.
For young fathers
For younger fathers who are still working and have several years before retirement, equity mutual funds are a smarter long-term choice. They invest in stocks and aim to deliver inflation-beating returns over time, making them suitable for wealth creation through consistent investments like SIPs.
Thakurta advocates equity mutual funds as it can be a powerful tool for long-term wealth creation as they provide diversification and flexibility, which reduces investor risk by providing them the ability to invest across multiple market caps and sectors.
Additionally, investors get the benefit of compounding which amplifies the wealth generation process over a longer period of time and equity mutual funds have historically delivered inflation-beating returns of 11-13% over long periods, making them one of the best tools for building a retirement corpus, he added.
Early planning
One of the most effective ways to accumulate wealth for retirement is through a Systematic Investment Plan (SIP) as SIPs allow investors to contribute a fixed amount at regular intervals, ensuring disciplined investing and reducing market timing risks and over the long run, SIP strategy smooths out market volatility, making SIPs an ideal choice for retirement planning, the expert mentioned.
For Example, if one starts SIP of Rs 25,000 with an annual step up of 10% for their father when he is of age 40 years, you would accumulate Rs 5 crore when he reaches at the age of 60 years.
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For fathers who have already retired and rely on their savings for monthly expenses, consider suggesting a Systematic Withdrawal Plan (SWP) as this allows your dad to invest a portion of his retirement savings in a mutual fund and withdraw a fixed amount at regular intervals and it not only ensures steady income but also allows the remaining corpus to stay invested and potentially grow.
Lastly, Thakurta shared a SWP plan for retirement as an SWP allows you to withdraw a fixed amount from your mutual fund investment regularly, making it a useful tool for monthly income after retirement and the remaining money stays invested and keeps growing.
The expert also advised to start with a safe withdrawal rate, like 5 to 6 percent, to make your savings last longer as it's flexible and helps manage expenses without depleting your corpus too quickly.
He shared that if an investor invested a corpus of Rs 1 crore at age 60 and expected a monthly cash flow of Rs 50,000 per month from his investment account then an investor with an asset allocation of 70:30 in equity and debt can end up with corpus of Rs 3 crore with a 4% starting withdrawal rate and a 5% incremental withdrawal rate while ensuring the ease of liquidity in the portfolio.
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