Hii Sir,
Private bank employee,with a monthly salary of 1.10 lacs ,want to retire early at the age 45 , present age 36 yrs.
Need monthly income of 2 lacs after retirement ,also need corpus of 2 cr for my daughter education and marriage ,daughter age is 3 yrs now.
Investment details.
Sip 17000 monthly since last 8 yrs with a total balance as on date is 23 lacs ,and in share market 1.5 lacs invested.
Fixed deposit of 20 lacs and 21 lacs in Mis at bank from there I am getting 16 k monthly .
In ppf investment 5 thousand monthly since last 3 yrs.total fund available 2.10 lacs.
In lic Yearly 1.55 lacs investment since last 10 yrs .
Rd of Rs 15000 monthly.
Kindly suggest
Ans: Early Retirement Planning for a Private Bank Employee
Retiring early is an admirable and ambitious goal. It requires a well-thought-out strategy. As a Certified Financial Planner, I understand your aspirations. Let's analyse your current financial situation and explore ways to achieve your goals.
Assessing Your Current Financial Situation
Your current financial landscape includes various investments. You have SIPs, shares, fixed deposits, MIS, PPF, LIC, and recurring deposits.
SIP (Systematic Investment Plan): Rs 17,000 monthly for the past 8 years, totalling Rs 23 lakhs.
Share Market: Rs 1.5 lakhs invested.
Fixed Deposits: Rs 20 lakhs.
Monthly Income Scheme (MIS): Rs 21 lakhs, generating Rs 16,000 monthly.
Public Provident Fund (PPF): Rs 5,000 monthly for 3 years, totalling Rs 2.1 lakhs.
LIC Policies: Rs 1.55 lakhs yearly for the past 10 years.
Recurring Deposit (RD): Rs 15,000 monthly.
Understanding your financial assets helps in forming a comprehensive retirement strategy.
Evaluating Your Retirement and Future Goals
You plan to retire at 45, requiring Rs 2 lakhs monthly post-retirement. Additionally, you need a corpus of Rs 2 crores for your daughter's education and marriage.
Monthly Income Requirement:
Post-retirement, you need Rs 2 lakhs monthly. This will require a substantial corpus to generate that income without exhausting your funds.
Daughter’s Education and Marriage Corpus:
You need Rs 2 crores in 15 years for your daughter's education and marriage. This needs careful planning and investment.
Investment Analysis and Recommendations
Based on your goals, let's discuss the strengths and potential adjustments to your current investment strategy.
Systematic Investment Plans (SIPs)
SIPs are a disciplined way of investing. Your consistent investment of Rs 17,000 monthly over 8 years is commendable. However, consider increasing the SIP amount as your salary grows to enhance your corpus.
Share Market Investments
Investing in the share market can yield high returns but also carries risks. Diversifying your portfolio with a mix of blue-chip and growth stocks could be beneficial. It's important to regularly review and rebalance your portfolio.
Fixed Deposits and MIS
Fixed deposits and MIS provide stability and regular income. However, they offer lower returns compared to other investment options. Consider reallocating a portion to higher-yielding investments for better growth.
Public Provident Fund (PPF)
PPF is a secure investment with tax benefits. Continue your monthly contributions, but also explore other tax-efficient options to complement this.
Life Insurance Policies (LIC)
LIC policies offer safety but often lower returns. Assess the performance of these policies. If they underperform, consider redirecting funds to more lucrative options.
Recurring Deposits (RD)
RDs offer moderate returns with low risk. They are good for short-term goals. For long-term growth, consider shifting some funds to equity mutual funds.
Strategic Financial Adjustments
To meet your early retirement and future goals, consider the following strategic adjustments:
Increase SIP Contributions:
Boost your SIP contributions regularly. This leverages the power of compounding, enhancing your corpus significantly over time.
Diversify Investments:
Diversify across asset classes. This spreads risk and can improve returns. Balance your portfolio with equity, debt, and alternative investments.
Active Fund Management:
While index funds have their place, actively managed funds can outperform in dynamic markets. They provide the potential for higher returns through professional fund management.
Professional Guidance:
Consult a Certified Financial Planner. They provide tailored advice, helping you navigate complex financial decisions and optimise your investment strategy.
Planning for Post-Retirement Income
To generate Rs 2 lakhs monthly post-retirement, consider the following:
Annuity Products:
Avoid these due to low returns. Instead, focus on investments that provide better growth and regular income.
Mutual Funds and SWPs:
Systematic Withdrawal Plans (SWPs) from mutual funds can provide regular income. They offer flexibility and potential for capital appreciation.
Equity and Debt Allocation:
Maintain a balanced allocation between equity and debt. This ensures stability while providing growth potential.
Planning for Daughter’s Education and Marriage
Achieving a Rs 2 crore corpus in 15 years requires disciplined investing. Here’s a plan:
Dedicated Investment Plan:
Create a dedicated investment plan for your daughter’s future needs. This can include a mix of equity and debt funds tailored for long-term growth.
Regular Reviews and Adjustments:
Regularly review your investments. Adjust as needed based on market conditions and performance.
Leverage Tax Benefits:
Utilise tax-efficient investments to maximise returns. This helps in growing your corpus without eroding gains through taxes.
Summary and Next Steps
Achieving early retirement and securing your daughter’s future is challenging but attainable with strategic planning. Increase your SIP contributions, diversify investments, and consult a Certified Financial Planner for personalised advice.
Your commitment to your financial goals is impressive. With careful planning and disciplined investing, you can achieve financial freedom and secure your family’s future.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in