When we think about financial planning for senior citizens, what comes to our mind is mostly a secured debt portfolio generating regular income and a small portion of the portfolio allocated to equity for growth. A lot of texts suggest equity allocation equal to 100 minus your age which means by age 70, maximum equity allocation should be 30%.
In the past 2 months, I came across two senior citizens for financial planning. One was the typical case that wanted the corpus to last their lifetime and hence having an income generating portfolio with low equity exposure. The other case was totally opposite. The Client around 70 years of age, wanted almost 90 per cent exposure to equity mutual funds and that too if possible in midcap and smallcaps. The reason? Well he said, his entire expenses are taken care by rental income. So he did not need his corpus to generate any income for him.
He essentially wanted this corpus to grow so that he can leave behind a legacy for his children. While am not going to go into the specifics of what was ultimately planned, but I really liked the way he thought out of the box and was not affected by the thumb rules suggested by financial texts and experts. Not to say the first Client was being too conservative, but that case required more debt allocation and not much bravado was required by dabbling more into equity.
These two cases clearly show us how dynamic financial planning gets and there are no set rules for asset allocation. Even for senior citizens, it does not mean the planner should go just for a high debt portfolio. Even for the younger Clients, they need to evaluate if their expenses can be met by a small allocation to debt, should they allocate the rest to equity and try to create generational wealth?
Comments