Hi, I am 32 now. My in hand salary is 1.30 lakh/month (post deduction of taxes, mediclaim and PF). I have around 15 lakh in PF (combining PPF and VPF). Around 6 lakh in FD. Now, per month I invest 47k in PFs, 20k in FD, 12.5 in Sukanya samriddhi yoyona, 10k in MF. I do not have any outstanding debt, have residential building. If I plan to increase my investment @5% per year, will I be able to create a retirement fund of 20 crore? And will it be sufficient to support me for 30 years podt retirement? (My current livelihood expense per month is around 25k)

Ans: You aim to accumulate Rs 20 crore by retirement (assuming age 60) and sustain a 30-year post-retirement period. Your current financial health is excellent, with no debts, a stable income, and disciplined savings. However, to assess whether your goals are achievable and the sufficiency of Rs 20 crore, let’s examine the following:

Key Assumptions
Time to Retirement: 28 years (till age 60).
Post-Retirement Period: 30 years.
Inflation Rate: 6% per annum (to estimate future expenses).
Investment Returns:
Equity Mutual Funds: 12% annually (post-tax).
Debt Instruments: 6% annually (post-tax).

Step 1: Estimate Future Expenses
Your current monthly expense is Rs 25,000. Considering 6% inflation, the monthly expense will grow significantly by retirement:

At age 60: Rs 1.42 lakh/month (approx).
Annual expense at 60: Rs 17.1 lakh/year.
For a 30-year post-retirement period, Rs 20 crore may suffice with proper withdrawals and portfolio management.

Step 2: Review Current Investments
1. Provident Funds (PF):
Existing corpus: Rs 15 lakh (combining PPF and VPF).
Monthly contribution: Rs 47,000.
Growth potential: Assumed at 7% CAGR.
2. Fixed Deposits (FD):
Current amount: Rs 6 lakh.
Monthly contribution: Rs 20,000.
Growth potential: Assumed at 6% CAGR.
3. Sukanya Samriddhi Yojana (SSY):
Monthly investment: Rs 12,500.
Lock-in: Till daughters turn 18 or 21.
Growth potential: Assumed at 7.6% (current rate).
4. Mutual Funds (MF):
Monthly SIP: Rs 10,000.
Growth potential: Assumed at 12% CAGR.
Step 3: Can You Reach Rs 20 Crore?
With a 5% annual increase in investments, let’s estimate your retirement corpus:

Contributions by Age 60 (Approximate):
Provident Funds (PPF/VPF): Rs 3.2 crore.
Fixed Deposits: Rs 1.2 crore.
Sukanya Samriddhi Yojana: Rs 1.5 crore (depending on daughters' ages).
Mutual Funds: Rs 7.5 crore.
Total Corpus: Rs 13.4 crore (approx).
Gap: Your goal of Rs 20 crore requires an additional Rs 6.6 crore.

Step 4: Bridge the Gap
To achieve Rs 20 crore, consider these adjustments:

1. Increase Equity Exposure:
Currently, equity (MF) comprises a small portion. Shift some fixed-income investments (FDs) to equity funds for higher growth.
2. Review FD Allocations:
FD returns are low after taxes. Redirect a portion of your Rs 20,000 monthly FD allocation to equity funds.
3. Enhance SIPs:
Increase your mutual fund SIPs from Rs 10,000 to Rs 25,000. Even small increases over time can significantly boost your corpus.
4. Annual Step-Up Investments:
Continue increasing investments by 5% or more annually. Regularly review your portfolio to maintain the right equity-debt balance.
Step 5: Post-Retirement Planning
Withdrawal Rate: A safe withdrawal rate is around 3-4% annually. With Rs 20 crore, you can withdraw Rs 80 lakh/year, which accounts for inflation-adjusted expenses.
Portfolio Allocation: Shift 60-70% of your portfolio to debt instruments closer to retirement to reduce risk.

Final Insights
Rs 20 crore is achievable with a higher focus on equity investments and disciplined saving.
Increasing your SIPs and reallocating funds from FDs to mutual funds can bridge the shortfall.
Rs 20 crore should sufficiently support a 30-year post-retirement period, considering inflation.
Consult a Certified Financial Planner (CFP) to monitor and optimise your strategy for consistent progress.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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