Consider your regular needs first before looking at returns from investment.

Once you retire, your perspective towards money needs to change considerably. For instance, now that your income earning capacity has eroded considerably, you need to think about ways and means to keep a regular income as well as have a corpus for emergencies.

In other words, you are completely dependent on the investments that you have made till date. And you are hoping that these savings and investments will outlive you. So in cricketing parlance, save your wickets is the mantra. The three stumps of retirement are like this: One stump is of liquidity, the second is of growth and the third is of regular income. And all these stumps have to kept standing and that too, independent of each other.

Liquidity is needed to meet emergencies. Emergencies could be health related or some unforeseen expenses. Since the life expectancy has been rising consistently, our corpus also has to stay above inflation for a larger number of years.

Therefore, we need to focus on growth of wealth. We also require regular income for routine expenses. The reason all the three stumps are independent of each other is because if the entire retirement corpus is kept in a savings bank account, it will give liquidity but it will not grow.

Also, if it is placed in entirely in equity based instruments, then it may grow faster. But since equity is a volatile instrument, it cannot be relied upon to meet regular (consistent) income. Lastly, if this corpus is placed in senior citizen savings scheme or post-office monthly income scheme than it will give regular income, but it will again not grow.

Also, in case you need liquidity, it will come at a cost in terms of interest or penalty. In other words, all these needs will have to be met independent of each other.

If one goes by rules of thumb, then one should set aside six months' household budget to meet contingencies. Funds equivalent to about one month's household expenses should be kept at home in the form of cash. The balance contingency fund may be kept in savings bank account which is linked to fixed deposit.

Next, invest in a way that will take care of the next four-five years of regular expenses. While calculating the figure, keep in mind regular inflow from pension, annuities and other income streams that are being currently received.

For regular income, consider annuities from insurance companies, senior citizen savings schemes, post-office monthly income scheme. Mutual funds also have monthly income plans; however its returns are linked to market condition and are not guaranteed.

Also, opt for equity based instruments for growth of retirement corpus. If you have both the skill and the time, pursue equity investing directly or go for mutual funds. After setting aside funds for contingencies and regular income, the balance amount should be parked in equity for growth.

Many a time retirees want to know the asset allocation of their corpus in terms of percentage. What percentage of amount should be parked in equity and how much should be in debt?

Here again the rule of thumb is to have about 25 per cent of assets in equity in initial years of retirement and later reduce it to 15 per cent of equity and the rest into debt.

However, do not directly jump into asset allocation. The most optimal way is to first provide for regular income. For this, the predominant investment should be in debt-based instruments. Next, set aside funds for contingencies. This will also be in debt based instruments. After this is over, park your funds in equity for growth.

It may happen that while you are trying to adjust your finances for regular income, contingencies and growth, you may not be able to adhere to the 25:75 (equity:debt) allocation.

But remember that as a retiree, you need to give priority to your needs of regular income, contingencies and growth. The ratio can be adjusted at a later date, depending on the growth of your wealth. It is your wealth that ensures a healthy and safe retirement life.