I am 39 years old IT professional.
Take home is 80k
Have a ppf - 15lac approx. about to be mature in a year.
Have a wifes ppf - 7lac approx. will mature in next 12 years.
In EPF having 10lac.
In Single MIS having 9lac
A small plot for 9lac
Father has passed away having a 2yo son and a younger brother and mother to take care.
Being in private sector and due to job unstability what should be the financial plan to save upto 2-3cr in next 4-5 years being conservative investor have not started sip there is NPS total invested is 2.3lac but couldn't see best returns. So my ask is on liquidity, health insurance and term insurance and where else can i invest which gives more financial stability and covers most of my worries after my death.
Ans: You are 39, an IT professional, with many financial responsibilities. You also have a young son, a younger brother, and an elderly mother to support. Let’s build a structured 360° plan that covers income safety, insurance protection, liquidity needs, and wealth accumulation goals.
1. Current Financial Snapshot
First, let’s understand your financial position fully:
Take?home salary: Rs 80,000 per month
PPF (your account): Rs 15 lakh (maturing in about 1 year)
PPF (wife’s account): Rs 7 lakh (maturing in ~12 years)
EPF balance: Rs 10 lakh
Single MIS: Rs 9 lakh
Plot of land: Rs 9 lakh value
NPS investment: Rs 2.3 lakh (started, low return)
Dependents: Son (2 years old), younger brother, mother
You aim to save Rs 2–3 crore over the next 4–5 years, while being conservative. You prefer stability and want strong post-death security for your dependents.
2. Clarify Retirement / Corpus Versus Income Goal
You mentioned wanting Rs 2–3 crore in 4–5 years. This implies:
Target corpus: Rs 2 crore in 5 years needs Rs 33–35 lakh per year investment.
Feasibility check: Your income may not allow such high savings immediately.
Therefore, refine the goal:
Decide your time horizon (e.g., 5 years vs 10 years)
Define purpose: Corpus for retirement or income flow
Decide on post-retirement monthly income expected
Then calculate realistic corpus and required savings
Without clarity, planning remains vague. Let’s assume you aim for Rs 1.5 lakh per month income post-retirement. You will need roughly Rs 3 crore corpus at a 6% systematic withdrawal. This requires systematic accumulation of at least Rs 30 lakh per year, which may need more time or higher savings.
3. Risk Profile and Asset Allocation
As a conservative investor:
You prefer stable returns over high-risk growth
But pure debt instruments may not help meet large corpus.
Balance is key: safe growth with moderate risk
Suggested ideal allocation without using real estate:
PPF / EPF / NPS: 40–50%
Active equity funds: 30–40%
Hybrid/debt funds: 10–20%
Liquid/short-term debt funds: 5–10% (liquidity buffer)
This mix helps achieve stability with steady growth.
4. PPF Maturity Management
Your PPF of Rs 15 lakh will mature next year. Here’s how to handle it:
Don’t withdraw all in one go unless needed
Continue partial investments in PPF or encash gradually
Use maturity proceeds to build liquid and debt funds
Post-maturity, divide funds into safety and growth portions
Some for health, term insurance, emergencies
Some for balanced investment in active funds
PPF’s tax-free and risk-free nature makes it ideal for cautious future deployment.
5. Diversification in Debt Instruments
You hold EPF, PPF, NPS, and MIS — strong debt base. However:
MIS interest is taxable and inflexible
NPS has limited liquidity at maturity
Term insurance is good but premiums may strain cash flow
Consider these adjustments:
Redirect some MIS into short-term debt or conservative hybrid funds
Continue EPF/PPF/NPS, but monitor allocations
Maintain health insurance and check for adequate coverage
Build an emergency fund in liquid/debt funds — target 6–12 months of expenses
6. Increase Exposure to Equity via Active Funds
You haven’t started SIPs yet. To grow corpus, equity exposure is essential.
Avoid index funds: they mirror markets, no downside protection
Active funds add value via expert stock selection
They may outperform in volatile or bear phases
Start with:
3–4 active equity funds via SIPs
Diversified, large-cap, multi-cap, sectoral mix based on risk level
Use regular plans via MFD–CFP, not direct plans
You gain professional guidance, periodic reviews, and alignment to goals
Direct plans only save expense ratio but lack personalized support
Begin with a modest monthly SIP of Rs 10,000–15,000 and increase each year.
7. Systematic Liquid Fund Allocation
Liquidity is critical for job instability and emergencies.
Keep at least Rs 3–4 lakh in liquid or ultra-short-term debt fund
This protects safety without locking in long-term instruments
It bridges income gaps during job changes
Avoid locking liquidity in MIS or fixed deposits alone.
8. Health and Term Insurance Review
You asked about insurance adequacy. Here's what we should check:
Term Life Insurance:
Suit your family’s income replacement and debt
With a 2-year-old child and liabilities, over Rs 1 crore cover is advisable
This ensures your son, brother, and mother are financially secure
Health Insurance:
Must cover whole family including child and mother
Choose a high coverage plan (Rs 5 lakh or more) with cashless hospital network
Covers hospital expenses, surgeries, and critical illness
Insurance safeguard is a non-negotiable foundation for your goals.
9. Repurpose LIC Policy
You hold a Rs 3 lakh LIC policy. Investment-cum-insurance products typically:
Have high charges
Offer low returns
Are illiquid
Suggest:
Consider surrendering this policy
Deploy proceeds into a mix of active equity funds and hybrid funds via regular plans
This improves returns and gives flexibility
Discuss surrender details with your MFD–CFP to avoid penalties or loss of insurance coverage. Instead, ensure you maintain term insurance and health cover separately.
10. Asset Reallocation and Withdrawal Strategy
You have multiple debt instruments maturing at different times. Use a phased withdrawal approach:
On PPF maturity: deploy 50% into SIPs, 30% into hybrid funds, 20% into liquid funds
Do similar for MIS if you wish to withdraw
For NPS EPF: continue till retirement, but track allocation
Gain from equity funds can be moved post-retirement to hybrid/debt for stable withdrawal
This creates a laddered portfolio that balances growth and distribution.
11. Build Monthly Income Plan Post-Retirement
We must design a corpus layout to meet Rs 1–1.5 lakh monthly income:
Assuming a Rs 3 crore corpus,
Debt/hybrid allocation: Rs 1.5 crore, earning ~8% annually → Rs 12 lakh per year
Active equity SIP withdrawals: Rs 12–18 lakh per year to replenish inflation and growth
The remainder in liquid/dynamic balance to meet monthly cash flow needs.
Corpus design should allow systematic withdrawal while preserving principal.
12. Monitoring and Rebalancing
We need to track progress actively:
Annual review of portfolio mix
Rebalance equity/debt allocation back to target
Track performance of active funds vs benchmarks
Adjust SIP amounts with salary growth and inflation
Use MFD–CFP guidance for recalibration and goal mapping.
13. Tax Planning for Better Efficiency
Be aware of current tax rules for mutual funds:
Equity funds: LTCG above Rs 1.25 lakh taxed at 12.5%; STCG taxed at 20%
Debt funds: gains taxed as per your income slab
PPF and EPF remain tax?free
Plan redemptions properly:
Withdraw slowly to stay under LTCG threshold
Choose redemption years carefully
Tax-efficient planning increases net returns and effective income.
14. Contingency Protection for Career Instability
Since job security is low:
Extend emergency fund to at least 6–12 months
Keep access to pre-approved credit (overdrafts) just in case
Avoid locking long-term wealth for immediate needs
Build secondary income—freelance skills or online training
This gives a buffer for months with low or no income.
15. Inflation and Lifestyle Adjustment
Your final income target must beat inflation.
Track yearly inflation at ~6–7%
Increase SIP amounts annually by at least this rate
Adjust equity allocation gradually as risk capacity grows
Post-retirement, budget for inflation-linked expenses
Lifestyle flexibility will help maintain corpus and quality of life.
16. Involving Your Family in the Plan
Plan with your wife and elder family members:
Discuss insurance, liquidity, and educational needs
Explain the need for systematic investing
Seek their support for withdrawal planning and spending control
Financial stability is easier with a supportive home environment.
17. Action Roadmap Summary
Let’s list your next steps:
Finalise goal: corpus, timeline, post?retirement income
Build emergency fund in liquid funds
Increase PPF withdrawal approach
Reinvest LIC maturity in active funds via regular plan
Start SIPs in 3–4 active funds at Rs 10k–15k/month
Check health and term insurance coverage adequacy
Build a withdrawal corpus plan using debt, hybrid, equity
Review and rebalance annually with advisor
Plan exit strategy based on funds performance and needs
Stick to this structured 360° plan with discipline and patience.
18. Avoid These Pitfalls
Don’t invest in index funds—they mirror market entirely
Avoid direct plans—lost guidance may cost more than fees saved
Don’t add annuities—they reduce flexibility and returns
Avoid real estate as wealth creation—it’s illiquid
Don’t prematurely withdraw debt assets—use them for income
Avoid mixing insurance in investment—keep them separate
Your conservative mindset is wise. But active planning will help you win long-term.
Finally
You have a solid base with PPF, EPF, MIS, and basic insurance.
Now, with disciplined strategy you can aim for Rs 2–3 crore corpus.
Combining stable debt, active equity investments, liquidity cushion, and insurance will protect you and your family.
Use a Certified Financial Planner and regular investment plans.
Review annually, increase SIPs, and remain aware of tax rules.
This will give you financial stability, liquidity, and peace of mind.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Dheeraj on Aug 21, 2024Hindi
