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Your dad’s retirement corpus is not your mutual fund 'project'

Our expert panellists are apprehensive and believe one should be extremely careful about handling the money of retired folks.

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Last Updated: Feb 12, 2020, 02.25 PM IST
Many sons and (some daughters) want to manage their dad’s retirement corpus all by themselves. Though they have absolutely no idea about mutual funds or basics of investing, they believe they can handle the money better than the qualified money managers. ETMutualFunds.com receives many messages on its official Facebook page from many dutiful sons and daughters’, asking whether they have chosen the right mutual fund schemes to invest their father’s (sometimes mom’s) retirement corpus.

Though we at ETMutualFunds.com are truly touched by the devotion shown by the caring sons and daughters, we treat these questions with a lot of trepidation. Our expert panellists also share our apprehension: one should be extremely careful about handling the money of retired folks.

We believe one should not use mom’s or dad’s retirement corpus to learn the ropes of investing in mutual funds. Sure, mutual fund universe is a small one and it is not very tough to learn just enough to take care of one’s investments. However, that’s not the same with a retirement corpus – that needs more care.

This is because the retirement corpus is all that the retirees have, to remain financially independent for the rest of their life. If a wrong investment choice depletes its value, they will get extremely anxious. Sure, a caring son may be a great source of comfort, but most retirees take financial losses very badly. This is not the case with an earning person, as s/he has time in hand to make up for the losses.

Also, young people handle money very differently from older ones, especially the retired ones. When you are investing on your parent’s behalf, just being cautious or safer (two words we come across in most messages) will not be enough. Your idea of being cautious and safer need not match your dad’s or mom’s definition of those phrases.

Also, most of our parents are not comfortable discussing money. If your parents can have a normal conversation about their financial plans and anxieties, you are lucky. Most financial planners say most retirees would like to manage their own money and they love to maintain their financial independence as long as possible.

Once kids step in to manage the money, they would yield only because they do not want to hurt the sentiment. If that is the case, they are unlikely to share their feedback with you regarding your way of handling their money.

Financial planners and mutual funds advisors say retirees fall into two categories: one with a regular pension to take care of their living expenses. Two, those without a pension. This group need to deploy their retirement corpus to take care of their living expenses for the next 25-30 years. Also, they should invest a part of the corpus to ensure that the money grows so that they don’t run out of money during their lifetime.

These things are easier than done. It involves a lot of number crunching and careful planning to ensure that the money is deployed in safest options. Sure, if your dad has a pension, you may have a great flexibility because your dad can even take a loss better than someone who is solely dependent on the retirement corpus for the best of their life.

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