I'm 44 with a passive income, do I have enough to retire and pay for my son's education?

Ans: Hello;

You may keep 50 L in a Arbitrage type mutual fund (low risk; easy redemption) for your kid's education.

You may buy immediate annuity for the balance corpus of 1.2 Cr from a life insurance company.

Assuming 6% annuity rate, you may expect monthly income of around 60 K.

So your passive income of of 30 K+ 60 K annuity income= 90 K is sufficient to cover your regular expenses of 70 K.

Happy Investing!!

Ans: You are 43 years old with an SIP allocation in both large-cap and mid-cap funds. You have a total mutual fund corpus of Rs 16 lakhs and an additional Rs 1.5 lakh in debt instruments. Your passive income is Rs 30k per month and expenses are Rs 70k per month.

Passive Income and Expenses
Your passive income covers part of your monthly expenses. This is good but not sufficient for your monthly needs. You might need to draw from your investments to cover the gap.

Retirement Corpus Calculation
Retiring now requires careful planning. To sustain your lifestyle, you need to account for 70k monthly expenses.

Let's assume:

Your retirement age is 60

Life expectancy is 85

Monthly expenses remain the same

You will need a significant corpus to cover 25 years of expenses post-retirement.

Educational Corpus for Your Son
Your son is 14 years old, and college expenses will kick in within the next 4-5 years. Assuming a conservative approach:

Consider the cost of education, including tuition and other expenses

Account for inflation

Investment Strategy
Continuing Current SIPs
Parag Flexi Cap

Canara Large Cap

Quant Active

Axis Mid Cap

Motilal Midcap

ICICI Mid and Large Cap

Potential Changes
Evaluate the performance of your current funds. If they are consistently underperforming, consider switching to better-performing funds. However, ensure these align with your risk profile.

Diversification
Balance your portfolio with a mix of large, mid, and small caps

Consider international exposure for broader diversification

Debt Instruments
With Rs 1.5 lakh in debt instruments, ensure they align with your risk tolerance. Debt instruments provide stability but lower returns.

Tax Efficiency
Be mindful of the new mutual fund capital gains tax rules:

LTCG above Rs 1.25 lakh is taxed at 12.5%

STCG is taxed at 20%

Regular Reviews
Regularly review and rebalance your portfolio. This keeps your investments aligned with your goals and market conditions.

Insurance
Ensure you have adequate health and life insurance. This protects your family's financial future.

Emergency Fund
Maintain an emergency fund equivalent to 6-12 months of expenses. This covers unforeseen situations.

Best Regards
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Hello;

Although you do not expect expenses to get higher from 70 K level currently but inflation will make it grow to 1.25 L in 10 years time considering 6% inflation.

It is recommended that you keep a sum of 50 L+ 16 L earmarked for higher education of your kid.

Inflation in education doesn't get reflected in CPI or WPI but is much higher currently hence a higher provision towards this is desirable.

If you invest your 1 Cr FD into equity MFs(3.11 Cr after 10 years )and continue 50 K sip for next 10 years(1.16 Cr), you will have a corpus of 4.27 Cr.

If you use this to buy an immediate annuity from a life insurance company you may expect a monthly payout of 1.5 L(post-tax).(Considering 6% annuity rate)

I would recommend you to postpone your retirement by 10 years considering ongoing expense of kids education and retirement corpus build, however if you have corpus of 5 Cr.(Preferably in a moderate risk scheme such as Kotak equity savings fund)today then you may do 3% swp and earn a monthly income of 1.1 L+30 K= 1.4 L total monthly income.

Happy Investing;

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