I will receive Rs 66 lakh as retirement benefits. How should I invest it to earn 7% annually? (2024)

FAQs

What is the best way to invest a retirement lump sum? ›

A lump sum could be invested to include a prudent allocation of equities and TIPS (Treasury Inflation-Protected Securities) to help assets have a better chance of keeping up with inflation. Or couple a pension with a portfolio of investments to provide a combination of both.

Build emergency savings

However you choose to invest your lump sum, it may also be a good idea to build an emergency savings pot. Typically, an emergency savings pot should cover about three months' salary and be quickly accessible so that you can use it whenever you need it.

Upon receiving a lump sum, the immediate question is where to store it. A savings account is a common choice, offering a secure place to keep your money while earning some interest. There are several types of savings accounts designed to cater to different needs and goals.

Plenty of safe places exist to put your money as a retiree. If you don't mind keeping it locked up for a specific time period, Treasuries and CDs are great ways to get a competitive return. Bond ETFs work well if you want to invest in a variety of bonds.

A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly. A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly.

If your company is in a volatile sector or has financial troubles, it may be worth taking a lump sum. But for most individuals, these are unlikely scenarios. If you have a pension plan, you should also know that it is risky to take a loan from your plan and will probably cost you more in the long term.

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

What is the best asset mix for retirement? ›

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

Dividend funds, balanced funds and bond funds are three compelling income options, although there are a range of other fund types that can provide retirees with cash flow. Arranging a dependable stream of income is a key part of your retirement plan.

As a general rule of thumb, you will withdraw approximately 5% of your retirement income every year for expenses. The Balance breaks down the numbers below: Start with $240,000 and multiply it by 5%, which equals $12,000. Next, divide $12,000 by 12 months, which totals $1,000 per month.

The average retirement age in U.S. is 64 years old, with the average retirement age across all states spanning from 61 to 67 years old. The Social Security Act sets the minimum age to retire at 65 to receive full retirement benefits, although the minimum retirement age will continue to rise.

Plan to work part-time during retirement

It could help you avoid a financial crunch if you're not coming in with all that much savings. Remember, too, that the work you do in retirement could look very different than the work you're doing now. Instead of taking an office job, you could work at a bakery in town.

To determine this number, consider the 6% rule: which states that if your monthly pension offer is 6% or more of the lump sum offer, you should choose the perpetual monthly payment option. If the number falls below 6%, you might do as well (or better) by taking the lump sum and investing it yourself.

Know: You will pay taxes on your lump-sum payout. Your lump sum money is generally treated as ordinary income for the year you receive it (rollovers don't count; see below). For this reason, your employer is required to withhold 20 percent of the payout.