I have Rs 2.5 crore. Should I invest it in bank FDs and opt for monthly interest to fund my household expenses?

I am 60 and have Rs 2.5 crore. Is it okay to put all this money in bank FDs and opt for monthly interest payments to run my household expenses of around Rs 1 lakh per month?

Bank fixed deposits (FDs) offer the comfort of predictable returns and perceived capital safety, making them a popular choice among retirees and senior citizens. While the predictability of returns is a reasonable assumption, the notion of capital preservation can be misleading, as fixed-income instruments typically fail to keep pace with inflation. For instance, if your corpus is invested in an FD yielding 7%, the annual interest of Rs 17.5 lakh— potentially tax-free when split between you and your spouse—may seem sufficient to cover yearly expenses of Rs 12 lakh, leaving a buffer for contingencies. However, over time, inflation will erode your purchasing power. At an assumed inflation rate of 6%, expenses could double every 12 years, while FD returns remain static (typically ranging between 6% and 8%). Since the interest income is fully utilised, there is no capital growth, leaving you exposed to long-term inflation risk. To mitigate this, a more prudent approach involves dividing the corpus into strategic “buckets”: one for short-term needs (3–4 years), parked in safe instruments like FDs; another for the medium term, invested in hybrid mutual funds with the intention of initiating systematic withdrawals after a few years; and a third for long-term growth, ideally allocated to equity-oriented instruments. This will help the portfolio combat inflation by introducing measured market exposure.

I am 45 years old, married, with one daughter. My wife is a homemaker. I earn Rs 22 lakh annually, and our monthly household expenses are around Rs 70,000. I currently have Rs 80 lakh in mutual funds, Rs 25 lakh in EPF, and own a house (no loans). I want to retire at 60. How much corpus should I target, and what asset allocation strategy should I follow to achieve this?

At 60, your monthly expenses will grow to Rs 1.93 lakh on the back of 7% inflation. To sustain similar inflation-adjusted monthly expenses till 90 years, you need a retirement corpus of Rs 5.40 crore. You should follow a dynamic asset allocation strategy that changes allocation percentages across different asset classes based on the investment scenarios. This is the most effective way to mitigate volatility in your portfolio and achieve decent returns to reach your target corpus. You can invest in a mutual fund portfolio consisting of direct plans of multi asset and dynamic asset allocation funds, providing diversification across different fund management styles and investment opportunities.

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