1. If a retiree is comfortable with his existing "dividend option" mode of equity mutual funds for his retirement income generation, despite the new Dividend Distribution Tax (DDT) rule, he could remain invested.
2. Otherwise, he could gradually switch to the Growth option, keeping the rules of LTCG/STCG tax and Exit load in mind for minimising expenses, and then use Systematic Withdrawal Plan (SWP) as his income generation mode.
3. Between the two, the Growth option scores because:-
a) There is no guarantee even of an yearly dividend distribution.
b) You effectively eat into your own capital, as the fund is just "removing" money from the main corpus for a "dividend payout".
c) MFs are highly liquid and let you realize the gains from the investment, through redemption / SWP / STP routes, whenever you need it.
d) Dividends may not necessarily be released when you actually need it.
e) You also postpone any tax payment till actual redemption in Growth option and after availing annual LTCG exemption.
f) It also leaves the question of timing out of the equation for generating income, when you need it.
4. Dividend option is only a periodic profit booking, without any additional gain like share dividends, as your own money is being returned to you.
5. Your retirement corpus gets depleted to that extent, losing its power of long-term compounding.
2. Otherwise, he could gradually switch to the Growth option, keeping the rules of LTCG/STCG tax and Exit load in mind for minimising expenses, and then use Systematic Withdrawal Plan (SWP) as his income generation mode.
3. Between the two, the Growth option scores because:-
a) There is no guarantee even of an yearly dividend distribution.
b) You effectively eat into your own capital, as the fund is just "removing" money from the main corpus for a "dividend payout".
c) MFs are highly liquid and let you realize the gains from the investment, through redemption / SWP / STP routes, whenever you need it.
d) Dividends may not necessarily be released when you actually need it.
e) You also postpone any tax payment till actual redemption in Growth option and after availing annual LTCG exemption.
f) It also leaves the question of timing out of the equation for generating income, when you need it.
4. Dividend option is only a periodic profit booking, without any additional gain like share dividends, as your own money is being returned to you.
5. Your retirement corpus gets depleted to that extent, losing its power of long-term compounding.