I want passive income of around Rs 1 lakh a month. I have Rs 2 crore in FDs. What should I do?

I will be retiring soon and am evaluating ways to earn a passive income of about 1 lakh a month from my investments. I have a corpus of Rs 2 crore but they are mostly with FDs. I don't have other overheads or liabilities. How should I plan this?

Reply by Nikhil Aggarwal, CEO & Founder, Grip Invest

Congratulations on nearing retirement with a substantial corpus.

Banks are currently offering attractive FD rates. Locking your ₹2 crore corpus into a large bank (HDFC, ICICI, SBI) FD for 3 to 4 years could indeed generate a predictable monthly income of ₹1-1.2 lakh. Investing in FDs currently can help you create a high corpus for your retirement.

But with inflation hovering around 5-6%, the purchasing power of that ₹1-1.2 lakh would reduce over time. In simple terms, what we currently buy with ₹1 lakh may cost significantly more in a few years considering if inflation remains the same.

Here's an alternative strategy that you could follow for both stability and inflation protection: allocate 60% of your corpus to FDs to ensure a steady income stream. The remaining 40% could be invested in highly-rated corporate bonds. While bonds carry some credit risk, careful selection can provide higher returns than FDs, potentially generating a blended monthly income of ₹1.4-1.5 lakh.

This approach offers several benefits. First, it mitigates the impact of inflation by potentially offering higher returns that keep pace with rising prices.

Second, any surplus income you generate can be reinvested to allow your returns to compound over time. This can significantly boost your overall corpus or wealth.

Remember, consulting with a financial advisor can be invaluable. They can help tailor this strategy to your specific risk tolerance and income needs, ensuring a smooth transition into a comfortable retirement.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)