Risk-free instruments where you can invest FD maturity proceeds

A bank FD I opened five years ago will be maturing soon and I will get Rs 20 lakh. I am 69 years old and I want to invest this sum in risk-free instruments to earn a monthly income. Please advise.

Jayant R. Pai, CFP and Head of Marketing, PPFAS Mutual FUND replies, "You may either choose to reinvest the entire sum with the same bank or another highly-rated bank and continue earning monthly interest. Avoid company fixed deposits, unless they enjoy the highest credit rating and choose short-term deposits—three years or less. Alternatively, you could invest a part of this sum— Rs 4.5 lakh in your name or Rs 9 lakh jointly—in the 5-year post office monthly income scheme, currently offering annual interest of 7.7% . However, you will incur some penalty if you withdraw prematurely. As you are above 60, you could invest Rs 15 lakh in the post office Senior Citizens’ Savings Scheme, which offers quarterly interest payouts. The current rate is 8.7% per annum. Interest income of up to Rs 50,000 from this scheme is tax free."

I am 62 years old and will be retiring soon. I’ll get around Rs 50 lakh in retirement benefits. Please suggest where I should invest this to earn a regular monthly income of Rs 30,000. I have invested Rs 15 lakh in SCSS and also get Rs 8,000 per month from an LIC policy.


Rahul Parikh, CEO, Bajaj Capital replies, "You may invest the lump sum in 3-4 low duration, accrual focused debt mutual funds and start systematic withdrawal plans at 7% per annum. The returns from these debt schemes should be in line with their historically 7-8% returns. Systematic withdrawal at 7% per annum for 20 years on investment of Rs 50 lakh earning 8% per annum should help you get a monthly cash flow of around Rs 29,000 per month and your investment is likely to grow to Rs 74 lakh in 20 years. You may choose any 3-4 schemes from the following: Credit risk funds: UTI Credit Risk and ICICI Pru Credit Risk. Corporate bond funds: HDFC Corporate Bond and Franklin India Corporate Bond. Short duration funds: Franklin India Short Term Income and Aditya Birla SL Short Term Opportunities."