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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 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

Asked by Anonymous - Jul 11, 2025Hindi

Hi, I'm 44 years old. I would like to construct a house with a home loan of 1 crore. Me and wife combined take home salary will be 1.45 lakhs. I had an FD of 50 lacs which I'm putting on SWP to generate some money for loan payback. 30 lacs i have it in SCSS but planning to withdraw that and put in SWP. 5 Lacs in FD. 5 Lacs in bank. We have two kids (Boy n Girl) I am investing almost 75000 per month on various insurance for kids as well as for our retirement. One of my LIC policy will be maturing in 2027 i might get around 20 lacs. Monthly expenses including the insurance premium, expenditure and house rent comes to 1.62 lacs. Kindly advise

Ans: Your savings are good. You are already planning well. You have discipline in your investments. That is rare and valuable. Now let us refine your plan for more clarity and long-term safety.

Let us now focus on your house construction, loan repayment, insurance load, children’s future, and retirement. The plan will focus on improving liquidity, aligning goals, and avoiding risk buildup.

? Income, Expenses and EMI Readiness

– Your joint income is Rs. 1.45 lakh per month.

– Monthly expenses are Rs. 1.62 lakh. This includes rent and insurance premiums.

– There is a shortfall of Rs. 17,000 per month right now.

– This gap is managed through SWP from FD or SCSS.

– You are planning a loan of Rs. 1 crore for home construction.

– At current rates, the EMI may be around Rs. 80,000 per month.

– Adding this EMI will increase your outflow to over Rs. 2.4 lakh per month.

– That is clearly not affordable with your current income.

– So your present plan will lead to severe cashflow stress.

– You are trying to support this with SWP. But that is risky.

– FD capital may deplete within 6–8 years if this pressure continues.

– You may not be able to sustain the EMI, insurance, and household cost together.

– So this is not a financially safe way to take a house loan now.

? Revisit House Construction Timeline

– You already live in a rented house.

– There is no mention of urgency to shift to a new one.

– Since loan stress will create imbalance, it is better to delay construction.

– Instead of Rs. 1 crore now, you may reduce loan amount by saving more.

– Avoid building the house now unless income goes up or expenses come down.

– Use the next 3–4 years to prepare financially.

– When your LIC policy matures in 2027, you will get Rs. 20 lakh.

– That money can go toward reducing your loan requirement.

– Also, by then, your kids may grow, and educational cost planning can be clearer.

– This wait-and-plan approach is safer and less stressful.

? Review of SWP Strategy

– You are using FD and SCSS to fund monthly needs via SWP.

– This seems like a short-term patch, not a long-term solution.

– FD and SCSS offer limited returns, usually 6–8% per annum.

– If SWP is more than interest earned, capital will start reducing.

– In 5–6 years, capital will fall sharply.

– Also, capital erosion may affect future retirement stability.

– This is not suitable for loan EMI support, especially for 15–20 years.

– You should not rely on SWP to support EMI for long term.

– Instead, SWP should be used only for small gaps in emergencies.

? Existing Insurance Premiums Need Careful Review

– You are spending Rs. 75,000 per month on insurance-related instruments.

– That is Rs. 9 lakh per year. This is extremely high.

– Likely these are mostly traditional policies like LIC, ULIPs, or endowments.

– These plans combine insurance and investment but give very low returns.

– Long-term IRR is usually just 4–5% only.

– These policies also lock your money for long periods.

– It is time to pause all new premium payments, if possible.

– Stop all traditional insurance plans. Don’t add any new ones.

– Surrender or make them paid-up, case by case.

– Do a detailed review of each policy with a Certified Financial Planner.

– Reinvest surrendered values into mutual funds via SIP.

– Focus on regular plans through MFD with CFP guidance.

– That will give better diversification, liquidity, and long-term growth.

– This change alone can help save Rs. 6–7 lakh yearly.

– It will help reduce your expense burden and release money for real goals.

? Use Mutual Funds Systematically

– Mutual funds are best for long-term goals like retirement and children’s education.

– SWP from mutual funds is also better than FD or SCSS.

– Mutual funds give better growth and are more tax-efficient.

– But avoid index funds. They don’t manage risk actively.

– Index funds follow market blindly, even when it is falling.

– Actively managed funds do better over time with good fund managers.

– They reduce risk during market correction and increase during growth.

– Use equity mutual funds for growth and hybrid funds for medium goals.

– SIPs in active funds through MFD with CFP support are ideal.

– This way, you balance risk, return, and liquidity.

? Children’s Education Planning

– You have two kids. Their higher education will need Rs. 25–50 lakh each.

– You must plan separate SIPs for this goal.

– Choose child-focused mutual funds or balanced advantage funds.

– Do monthly SIPs for at least 10–12 years.

– Let the investment grow with compounding.

– Avoid using insurance plans for children’s education.

– Insurance-linked child plans give poor returns and less flexibility.

– Also, don’t mix your home loan burden with children’s goals.

– Their future education should not depend on house construction or loan.

? Retirement Goal Needs Focus

– You are 44 years old. You have 16 years for retirement.

– You need to create enough funds for retirement lifestyle.

– Don’t depend on SWP from FD or LIC maturity alone.

– Those are short-term sources and not inflation-proof.

– Create a separate SIP-based portfolio for retirement.

– This must include large-cap and hybrid mutual funds.

– Increase SIP amount as income rises.

– Track SIP progress every year with a Certified Financial Planner.

– After age 60, start SWP from retirement mutual fund portfolio.

– That will give stable income and flexibility.

? Review and Protect Insurance Coverage

– You need pure term insurance. You already have one.

– Confirm if the term cover is Rs. 1 crore or more.

– If less, increase it to Rs. 1.5–2 crore now.

– Avoid mixing insurance and investment again.

– Mediclaim should cover the full family. At least Rs. 15–20 lakh total.

– Choose floater health policy with lifetime renewal.

– Consider super top-up plans for additional health coverage.

– Do not depend only on employer-provided policies.

– Those stop if you leave or retire from the job.

? Emergency Reserve Planning

– Emergency fund is very important now.

– You already have Rs. 5 lakh in bank. That is good.

– Maintain minimum of 6 months’ expense in savings or liquid funds.

– Keep Rs. 10–12 lakh as emergency reserve before thinking of any house loan.

– This amount should not be used for EMI or other goals.

– Emergency fund gives safety during job loss or health issues.

– It helps you avoid selling long-term investments in panic.

? House Purchase Planning – A Safer Approach

– Don’t take Rs. 1 crore loan with current income and expenses.

– Try to reduce house cost or increase own contribution.

– Delay house building until your LIC maturity in 2027.

– Use that Rs. 20 lakh to reduce loan size to Rs. 80 lakh or lower.

– That will reduce EMI pressure.

– Target a loan EMI that is below 30–35% of your take-home salary.

– Plan construction when insurance premiums are under control.

– Once the loan is manageable, you can build without disturbing other goals.

? Investment Structure Going Forward

– Stop all insurance-based investments. Surrender where suitable.

– Use mutual fund SIPs through MFD with CFP credential.

– Keep separate SIPs for retirement, child education, and emergency reserve.

– Avoid SWP from capital-heavy FD or SCSS.

– Use those for short-term goals only if needed.

– Focus on liquidity, flexibility, and growth.

– Keep reviewing your financial plan every year.

– Align your goals with income and risk comfort.

? Tax Efficiency Tips

– Mutual funds are tax-efficient compared to FD or SCSS.

– For equity mutual funds, LTCG above Rs. 1.25 lakh is taxed at 12.5%.

– STCG is taxed at 20%.

– For debt mutual funds, gains are taxed as per your income slab.

– Traditional insurance maturity is taxed if premium exceeds limit.

– FD interest is taxed every year. It reduces actual return.

– SWP from mutual funds is better than FD interest.

– Use this tax edge while planning your portfolio.

? Finally

– You are a sincere and forward-looking person.

– You already saved well and built multiple assets.

– But don’t overcommit to a big home loan right now.

– First reduce your insurance premiums and expenses.

– Then build your mutual fund-based investment plan.

– Delay house building until 2027 when LIC maturity gives you extra support.

– Keep emergency reserve strong.

– Protect your family with pure term and health covers.

– This balanced and focused approach will help you live peacefully.

– You will secure both your kids’ education and your own retirement.

– Stay consistent, and your goals are fully achievable.

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

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