What is the right asset allocation for your retirement corpus?

Many of us may have wondered whether there is something called auto-pilot mode for managing one’s investment. Yes, you may find many online software that would get this job done. However, the software would only give you output based on the inputs that you give at the time of planning your retirement. However, financial planning or retirement planning, for that matter, is very dynamic in nature. So, auto-pilot mode often won’t help much. Rather it requires periodic monitoring and review.

Generally, investors worry as to what is the right asset allocation for the retirement corpus at the time of retirement. Whether one must continue with the existing asset allocation or one must change it to suit the requirements at the time of retirement. Let’s find out.

It is always advisable to change the asset allocation at the time of retirement as the overall situation and requirements must have changed. Most people have less or almost no earnings when they are retired. However, the corpus that you receive at the time of retirement by way of EPF (Employee Provident Fund) also may not be sufficient to serve you until your life expectancy, if not planned and invested properly. As the income in your golden years is less, more importance or weightage must be given to capital preservation rather than growth unlike the phase prior to retirement wherein you can take much more risk and invest with growth perspective. So, people usually become conservative when they retire, which is but obvious behavior. But even though at least 20 per cent to 25 per cent of your portfolio must contain equities to provide better inflation-adjusted returns.

So when you move to retirement invest your major part in debt mutual funds and rest in equity mutual funds. However, you have to again assess your risk profile to understand what kind of risk you are willing to take and what kind of risk you actually can take and based on this assessment you would be able to choose in which asset class to invest.