Can we build a well-diversified retirement portfolio – a retirement basket as PV Subramanyam of subramoney.com would say? Such a portfolio should be robust enough to handle all types of expenses in retirement – everday expenses for a comfortable life, discrenationary expenses to splurge a little from time to time, emergencies, both planned and unexpected lifestyle changes etc.
This is my idea of such a robust retirement portfolio. It is not easy to build this. It will take decades and sadly those who are close to retirement may not have all the elements.
- A pension or annuity or RBI Retail Direct Bond purchase with annual interest = expenses in the first year of retirement. This is known as income flooring. You can include this as an option in the freefincal robo advisory tool.
- Remaining corpus to go into bucket strategy (which will have a cash emergency component). This is an illustration created with the robo tool. I am 30 and wish to retire by 50 how should I plan my investments?
- Dividends from a stock portfolio (see video below) for discretionary expenses
- Stock portfolio value = emergency fund or for discrenationary expenses. Don’t be surprised! That six-month emergency fund in sb account is for those starting out. Rich people sell stocks.
- Passive income. See these resources for details
- Active income from freelancing at will. More than the income it is for spending time productively and not worry if my son packed his lunch to work.
- Rental income if applicable. Please do not buy real estate for rental income or as an investment if you cannot invest enough for retirement.
If we build a retirement basket with multiple income streams, we lower sequence of returns risk and the risk of emergencies – especially ones with recurring expenses. With luck, we might even leave a legacy behind.
Start thinking about alternative income streams. Those who cannot invest more have only one choice – manage their time better and find ways to turn their skills into income!
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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