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Ramalingam Kalirajan |10870 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 11, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Tariq on Sep 01, 2025Hindi

Hi, I'm 42, an NRI. My monthly package is 3lakhs. I have own home. 3 kids 11,13&15. My monthly expenses is 1 lakh. Kindly advice me best investment plan so that I can retire in next 5 yrs.

Ans: You are in a strong position. You already own a home and have stable income. You are disciplined to track expenses. This shows clarity and focus. Many people at your stage still struggle with basics. You are already one step ahead. Now we must build a 360-degree plan to prepare for early retirement.

» Current financial snapshot

– Age is 42, income Rs 3 lakhs monthly.
– Monthly expense is Rs 1 lakh, balance Rs 2 lakhs available.
– Home is already owned, so no housing loan stress.
– You have three children aged 11, 13 and 15.
– Their higher education and marriage are upcoming responsibilities.
– Retirement target is just 5 years away, which is aggressive.
– Wealth creation needs sharper focus and proper risk control.

» Early retirement challenge

– Planning retirement in 5 years is not easy.
– You must fund your lifestyle from 47 till 85 or 90.
– This means at least 40 years of expenses.
– Inflation will increase costs every year.
– Your children’s education costs will peak in coming 5 to 10 years.
– So retirement planning must consider parallel funding for kids.
– Without balance, retirement may become stressful.
– But with careful asset allocation, this goal is possible.

» Importance of surplus

– You save Rs 2 lakhs monthly after expenses.
– This is a big advantage.
– In 5 years, you can accumulate large capital.
– Savings discipline is key in short horizon goals.
– Deploying this surplus wisely is the most important step.

» Role of existing assets

– You already have a house.
– That provides security and reduces future costs.
– No need to put money in another property.
– Real estate brings low liquidity and high maintenance.
– Better to focus on financial assets.
– Liquidity will help you manage retirement cash flow smoothly.

» Investment plan for 5 years horizon

– Avoid risky high allocation to small cap or aggressive funds.
– Market corrections in short horizon can derail plan.
– Keep allocation across equity, debt, and international funds.
– Equity for growth, debt for stability, and international for diversification.
– SIP with yearly top-ups can build sizeable corpus quickly.
– Since horizon is short, move funds gradually towards safer debt assets after 3 years.
– This ensures market fall does not disturb retirement goal.

» Concerns with index funds

– Some NRIs are tempted to buy index funds.
– They look cheap but are not always effective.
– Index funds are passive and cannot adapt to cycles.
– They hold concentrated exposure in few large companies.
– They do not protect in falling markets.
– For early retirement goal, you need more flexible approach.
– Actively managed funds can capture opportunities across cycles.
– Active funds give better risk-adjusted returns for Indian investors.
– Hence avoid index-based exposure in this plan.

» Concern with direct funds

– Many NRIs prefer direct mutual funds for lower expense ratio.
– But direct funds come with hidden risks.
– You miss expert advice on asset allocation.
– Mistakes in rebalancing can cost much more than saved charges.
– Without guidance, you may panic in market downturns.
– Regular funds with CFP support bring customised solutions.
– Professional review aligns funds with your retirement and children’s goals.
– Investing via CFP ensures discipline and reduces costly errors.
– For a 5-year high-stake plan, professional support is vital.

» Children’s education funding

– Kids are 11, 13 and 15.
– Education costs will rise within next 3 to 7 years.
– You must plan a separate corpus for them.
– Do not mix their goals with retirement pool.
– Start SIPs in balanced equity funds with gradual derisking.
– Ensure funds are ready when needed without disturbing retirement savings.
– You may keep education corpus partly in debt for safety.
– This way you meet both goals together.

» Retirement corpus building strategy

– In 5 years, you need maximum growth possible with controlled risk.
– Allocate higher part in equity for next 3 years.
– Gradually move 50% of that equity into debt by year 4 and 5.
– This protects from sudden market crash before retirement.
– Keep some part in liquid and ultra-short debt for near-term expenses.
– After retirement, you can use systematic withdrawal plan from funds.
– This provides monthly income flow.
– Keep annual rebalancing to adjust between equity and debt.
– This strategy balances growth and safety.

» Emergency and health planning

– Retirement without job means more stress on reserves.
– Build emergency fund of at least 1 year expenses.
– Keep this in liquid mutual funds or high safety instruments.
– Review health insurance and increase coverage if low.
– With three children, medical costs can be heavy.
– Protection through adequate cover is non-negotiable.

» Tax awareness

– As NRI, you will face taxation in India and possibly abroad.
– Equity mutual funds in India taxed with new rules.
– LTCG above Rs 1.25 lakh taxed at 12.5%.
– STCG taxed at 20%.
– Debt fund gains taxed as per income slab.
– Plan redemptions carefully to reduce tax impact.
– Better to use professional tax planning along with investments.

» Risk of early retirement

– You will stop active income by 47.
– Inflation, long life span, and kids’ expenses will continue.
– Risk of outliving savings is very high.
– Discipline, asset allocation and professional guidance become key.
– You must review portfolio every year without fail.
– Ensure post-retirement income is inflation-adjusted.

» Finally

– You have good income and savings potential.
– Retirement in 5 years is challenging but possible.
– Key steps are: build large capital in 5 years, plan separate education corpus, balance equity and debt wisely, avoid index funds, avoid direct funds, move to regular funds with CFP guidance, protect with insurance and emergency fund, and shift gradually to safer assets before retirement.
– With these actions, your dream of early retirement can become reality.
– Your discipline and savings ability will ensure financial freedom for family.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

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