For senior citizens receiving large retirement payouts such as Employees’ Provident Fund (EPF) maturity proceeds, the challenge often lies in balancing safety with growth while avoiding excessive exposure to market volatility.
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A 64-year-old retiree who is expecting to receive around Rs 3 crore from EPF maturity by the end of May 2026 (deferred maturity after extending it by max of three years) reached out to ETMutualFunds to sought advice on deploying the corpus across government-backed schemes, G-Secs, and mutual funds.
The investor plans to allocate Rs 30 lakh — the maximum permissible amount — to the Senior Citizen Savings Scheme (SCSS) through State Bank of India and invest a part of the remaining corpus in government securities through the Reserve Bank of India platform.
The investor also considered investing across multiple mutual fund categories including balanced advantage funds, large-cap funds, large & mid caps, flexi-cap funds, mid-cap funds, focused funds, multi-cap funds, and small-cap funds. In addition, the investor already holds around Rs 1.7 crore in NPS Tier-I investments with allocation towards government securities, corporate bonds, and equities.
The expert, Shivam Pathak, CFP and Founder of Asset Elixir analysed the portfolio and told ETMutualFunds that the primary objective during retirement should be generating sustainable and tax-efficient passive income while simultaneously allowing surplus funds to grow over time.Pathak explained that retirees should first calculate their actual annual income requirement instead of attempting to maximise returns unnecessarily. For example, if the annual requirement is Rs 12 lakh, there is no need to generate Rs 24 lakh and pay unnecessary taxes on excess income,” the expert said.
To create stability and predictable cash flows, the expert recommended combining government-backed income instruments with carefully selected market-linked investments.
For stable income generation, the expert suggested using: Senior Citizen Savings Scheme (SCSS), Government securities (G-Secs/Gilts) through RBI Retail Direct, and laddered bond maturities to manage liquidity and interest rate risks.
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Instead of investing the entire G-Sec allocation into a single maturity bucket, the expert recommended a laddering strategy by spreading investments across different maturities such as 3-year, 5-year, and 10-year securities.
According to Pathak, this approach helps ensure periodic liquidity, reduces reinvestment risk, and allows investors to benefit from changing interest rate cycles over time.
For surplus funds not immediately required, the expert also suggested considering low-volatility and tax-efficient arbitrage funds such as: Kotak Equity Arbitrage Fund and Nippon India Arbitrage Fund. These funds can potentially offer better post-tax efficiency compared to traditional fixed-income options while maintaining relatively lower volatility.
For long-term growth allocation — particularly for money not required for at least five years — the expert advised maintaining diversified exposure across equity categories rather than investing aggressively in high-risk segments.
The suggested long-term allocation according to Pathak included:
- UTI Nifty 50 Index Fund – 20%
- Nippon India Large Cap Fund – 20%
- Bandhan Multi Asset Fund – 15%
- HDFC Flexi Cap Fund – 20%
- Edelweiss Mid Cap Fund – 5%
- Nippon India Small Cap Fund – 5%
- Axis Global Equity Alpha Fund of Fund – 15%
The expert also emphasised that despite moderate risk appetite, retirees should avoid over-allocation towards mid-cap and small-cap funds because of their higher volatility profile. Instead, diversified categories such as flexi-cap, index, and multi-asset funds can help balance growth with risk management.
The final recommendation focused on three key priorities. According to Pathak, these include generating stable income for regular needs, maintaining tax efficiency and allowing surplus retirement corpus to grow steadily over the long term.
Experts say retirement investing should ultimately be designed around financial independence, predictable cash flows, and preserving purchasing power rather than chasing aggressive short-term returns.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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