I am 52 years old. My wife, son and my father are dependent on me. My monthly income is 3.5L and my investment/savings are 10% of my income. I am living in my own home on which there is no liability. I have taken a loan of 75L for a second home for which the EMI will be around Rs.80,000/-. I have a portfolio of 50L in equities, 5L in MFs, 10L in FDs, 7L in PPF and 20L in physical gold. My father's home (worth 80L) is in my name, though I don't intend to sell it now. My biggest expenses are higher education for my son abroad and his marriage. I will want to work till atleast 65 years of age. How much will I need for my retirement and what should be my investment strategy. Please advise.
Ans: You are 52 now. You want to work till 65.
You have 13 more earning years. You are thinking about retirement planning. That is timely.
You also have dependent family members. You also have big goals like son’s education and marriage.
Now let’s build a 360-degree view and give a clear action plan.
Understanding Your Current Financial Profile
Your monthly income is Rs. 3.5 lakhs. That is a strong income.
Your current savings rate is only 10%. That is Rs. 35,000 per month.
You are living in your own house. There is no loan on it. That is a strength.
You have taken a loan of Rs. 75 lakhs for a second house. EMI is Rs. 80,000.
You already have assets in many categories. Let’s list them below.
Your Asset Distribution Today:
Equity portfolio: Rs. 50 lakhs
Mutual Funds: Rs. 5 lakhs
Fixed Deposits: Rs. 10 lakhs
PPF: Rs. 7 lakhs
Physical Gold: Rs. 20 lakhs
Father’s home (in your name): Rs. 80 lakhs (Not for sale now)
Immediate Observations on Current Strategy
Your debt EMI is around 23% of your monthly income. That is on the higher side.
Your overall investments are diversified, but need better allocation.
Your gold holding is 20% of your investment value. That is too high.
You have very low exposure to mutual funds. That needs to be increased.
Your equity value is high. But need to check the quality and risks.
You are saving only 10% of income. That needs to be doubled.
Your Key Goals Identified
Retirement at age 65. You have 13 years to plan.
Son’s higher education abroad. It is a near-term high-cost goal.
Son’s marriage. This will also need large funds.
Managing your father’s needs. It needs regular cash flow.
Regular income for wife in your absence. This must be secured too.
Retirement Fund Planning
Let’s first plan for retirement. That is your most important long-term need.
You are 52 now. You want to retire at 65. So, 13 years of saving time.
After 65, you may live for 25 more years. So plan for at least 25 years.
You may need Rs. 80,000 per month (in today’s value) during retirement.
Due to inflation, this will grow. You may need over Rs. 2 lakhs monthly at retirement.
So, you must create a retirement corpus of at least Rs. 4.5 to 5 crores.
This includes both lifestyle expenses and healthcare.
This corpus must be built step by step from now.
Strategy for Retirement Corpus
Start saving 25% of your income every month for retirement. That is Rs. 87,500.
Increase your mutual fund allocation for long-term goals.
Use actively managed funds. Do not use index funds.
Index funds lack fund manager skill. They just copy the market.
In market downturns, index funds may fall harder.
Actively managed funds help manage risk better.
Also, do not invest in direct mutual funds.
Direct plans may save cost but offer no personal advice.
Instead, invest via MFDs who are guided by Certified Financial Planners.
You get personalised planning and continuous review.
Review asset allocation every year with help of your planner.
Education Planning for Son
This goal is coming soon. You will need a big amount.
Find out the total cost of his course. Include tuition, living, travel.
Start a dedicated SIP for this goal.
Use low-duration funds if the goal is less than 3 years away.
If you need funds within 2 years, avoid equity.
For 3-5 years horizon, use balanced allocation funds.
Don’t use FDs for long horizon goals. FD returns are not inflation-beating.
Also avoid gold for education goals. Gold is not predictable.
Use mutual funds with steady performance.
Rebalance quarterly if possible. This reduces risk.
Marriage Planning for Son
Set a budget for the wedding.
You still have time for this goal.
Use long-term mutual fund SIPs to build the marriage fund.
Choose good performing diversified funds.
Don’t stop SIPs midway.
Review once a year to check target progress.
Avoid investing in real estate for this goal.
Real estate has low liquidity and high entry cost.
Your EMI and Real Estate Strategy
EMI of Rs. 80,000 per month is fixed now.
That is around 23% of your monthly income.
Try to prepay this home loan faster.
Make annual part-payments if possible.
Reduce the interest outgo and loan term.
Don’t buy another property now.
Real estate has high cost and low flexibility.
Also, selling a property takes time and effort.
Instead of more properties, focus on mutual funds.
Mutual funds offer better liquidity and professional management.
Also, no maintenance cost like in property.
Optimising Your Investment Portfolio
Let’s optimise your current investments. Below are ideas:
Equities (Rs. 50 lakhs):
Review portfolio quality and sector allocation.
Exit high-risk or non-performing stocks.
Diversify better across sectors and themes.
Avoid too much exposure to small-cap or penny stocks.
Consult a Certified Financial Planner for portfolio review.
Mutual Funds (Rs. 5 lakhs):
This is very low compared to equity. Increase it step by step.
Add SIPs in actively managed funds.
Avoid NFOs and trendy sectoral funds.
FDs (Rs. 10 lakhs):
These give low returns after tax.
Keep only for emergency fund or 1-year goals.
Rest should be reallocated to better products.
PPF (Rs. 7 lakhs):
Continue yearly contributions till retirement.
This gives tax-free and safe returns.
Max out yearly limit for compounding benefits.
Gold (Rs. 20 lakhs):
This is 20% of your portfolio. That is too high.
Reduce it to 10% slowly.
Avoid physical gold. Instead shift to Sovereign Gold Bonds.
Physical gold has storage, wastage, and purity issues.
Family Protection Strategy
Life Insurance:
You must have a term plan of 15 to 20 times annual income.
This covers your family’s future if something happens to you.
Don’t buy investment-linked policies.
If you hold LIC or ULIP or endowment plans, surrender them.
Reinvest that amount in mutual funds.
Health Insurance:
Ensure separate cover for all family members.
Include your father and son too.
Corporate cover is not enough. Take individual policy.
Also add critical illness cover.
Estate Planning and Father’s Home
Your father’s home is in your name.
You don’t plan to sell now. That is fine.
Keep all documents clear and updated.
Make a registered Will. Mention distribution wishes clearly.
Nominate your wife and son in all financial instruments.
This avoids legal issues later.
Action Plan Summary
Increase your monthly saving to 25% of income
Use mutual fund SIPs to build retirement, education, marriage goals
Avoid index funds and direct plans. Use active funds via MFDs with CFP help
Reduce exposure to real estate and gold
Review equity portfolio with professional help
Prepay second home loan gradually
Secure family with term insurance and health cover
Rebalance portfolio yearly
Create Will and update nominations
Finally
You have strong income and some assets. That is a good start.
But current savings and portfolio allocation need changes.
Real estate and gold are high. Mutual fund exposure is low.
You need to shift slowly from fixed assets to liquid investments.
You also need goal-based planning. Separate funds for each goal.
Your retirement corpus target is Rs. 4.5 to 5 crores.
With 13 working years left, it is possible with discipline.
Take help from a Certified Financial Planner to build and monitor your plan.
Stay invested regularly. Review yearly. Protect your family always.
This approach will bring financial peace and clarity.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Arjun on Jul 11, 2024English
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