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Ramalingam Kalirajan |10870 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 24, 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 - May 24, 2025

Dear Sir, I am 33 years old and have an 8-month-old child. I am planning to retire at the age of 45. My current salary is 1.2 lakh per month, and I have no savings so far. Could you please suggest a financial plan for me?

Ans: You are 33 years old, have an 8-month-old child, and plan to retire at 45. You are earning Rs. 1.2 lakh per month and currently have no savings. Your goal is bold and needs a clear and disciplined strategy. Let’s build a financial plan that works for you.

As a Certified Financial Planner, I will break it down into clear sections. This approach gives you 360-degree clarity.

Understand and Acknowledge Current Reality

You have 12 years to build your retirement corpus.

With zero savings now, early retirement at 45 needs focused execution.

Having a young child increases responsibility and expense going forward.

Right now, income is your only strength. Use it wisely and strategically.

Build a Solid Budgeting Structure

Start by tracking every rupee spent each month.

List all fixed expenses like rent, EMIs, fees, groceries, and transport.

Identify unnecessary spends like subscriptions, eating out, and gadgets.

Create a monthly budget with at least 35% for savings and investments.

Keep lifestyle inflation under check to maintain a healthy saving rate.

Create an Emergency Fund First

Emergency fund is the first step before investing.

Save at least 6 months of expenses in a separate liquid account.

Do not invest this money in risky options like shares or mutual funds.

Keep this fund in a mix of savings account and short-term liquid instruments.

Use it only for real emergencies like medical, job loss, or accidents.

Start Insurance Protection Immediately

You must protect your family from financial shocks.

You need term insurance of at least 15 times your yearly income.

Since you are the only earner, take Rs. 1.5 crore to Rs. 2 crore coverage.

Keep it separate from investment. Only pure term plans are required.

Take health insurance for yourself, spouse and child immediately.

Save for Retirement Before Other Goals

Retirement is your first priority as you have only 12 years left.

Save minimum 40% of your monthly income towards retirement corpus.

As your income grows, increase savings too without increasing expenses.

SIP (Systematic Investment Plan) in mutual funds is a powerful tool.

Begin SIP with even Rs. 15,000 per month and increase every 6 months.

Choose the Right Mutual Fund Strategy

Do not go for index funds. They are passive and follow the market blindly.

Index funds lack flexibility in falling markets and offer limited downside protection.

Prefer actively managed mutual funds. They can beat inflation better.

Invest in mutual funds through a Certified Financial Planner or MFD.

Do not choose direct mutual funds. You miss personalised guidance.

Children’s Education Planning is Secondary Now

Your child’s education will need funding in 15–18 years.

Right now, retirement is urgent. Prioritise it over child education.

Later, when retirement plan is on track, start SIPs for education.

Use goal-based investing. Tag your SIPs for each specific goal.

Avoid Any ULIP, Traditional or Combo Policies

Do not mix insurance and investments.

ULIPs, endowments and money-back plans give poor returns.

If someone sells such policy, ask if it beats inflation after tax and costs.

Avoid plans with lock-ins, poor liquidity and complex bonus structures.

Don’t Rely on Real Estate for Retirement

Real estate needs huge money, offers poor liquidity.

Selling property quickly is tough when you need urgent cash.

Rental yield is low and maintenance costs are high.

For retirement income, mutual fund SWP works better than real estate rent.

Use Step-Up SIP for Growing Contributions

Increase your SIP amount every year with income growth.

Even a 10% rise annually makes a big difference in final corpus.

This creates wealth without impacting current lifestyle too much.

Review Your Plan Every Year

Life situations and income levels change each year.

Set a fixed date every year to review your goals and investments.

Use this review to make changes if needed.

A Certified Financial Planner will guide you in reviewing goals and SIPs.

Plan Tax Smartly

Tax saving is important but should not be the goal of investment.

Don’t choose PPF or endowment just for tax benefit.

Use ELSS mutual funds. They give tax benefits and also create wealth.

Plan taxes using smart instruments. Avoid investing only to save tax.

Control Lifestyle Inflation

As salary grows, we spend more on lifestyle.

This kills the chance to save more. Stop lifestyle creep.

Keep basic comforts but avoid social comparison spending.

Budget extra income into investment before lifestyle upgrades.

Focus on One Goal at a Time

Don’t try to save for too many goals together.

You have 12 years. Use first 6–8 years only for retirement.

After building base corpus, plan for other goals like house or education.

Have a Clear Exit Strategy

Your retirement corpus should give income after age 45.

Don’t keep money idle. Use a withdrawal plan like SWP (Systematic Withdrawal Plan).

Use mix of debt and equity funds to protect principal and give income.

Plan it with professional help to reduce tax and risk.

Mind Your Taxes When You Withdraw

After retirement, mutual fund withdrawals will be taxed.

Equity mutual funds: LTCG above Rs. 1.25 lakh taxed at 12.5%.

STCG on equity taxed at 20%.

Debt mutual fund gains taxed as per income slab.

Plan withdrawal smartly to reduce tax burden post-retirement.

Avoid Personal Loans and EMIs

Stay away from loans for wants. Take loans only for needs.

EMIs reduce your saving ability and delay financial freedom.

If needed, build a sinking fund for upcoming expenses.

Don’t use credit cards or loans for vacation, shopping, or gadgets.

Build Financial Discipline Through Automation

Automate SIPs and savings through ECS.

Treat SIP like any other bill or EMI. Never skip it.

Auto transfers remove the temptation to spend first.

Keep a separate account only for investments.

Use Joint Planning with Spouse

If spouse earns, make her part of your plan.

Plan joint goals like child’s education and retirement.

Split SIPs and insurance between both for better tax benefits.

Teamwork in money management improves success chances.

Prepare a Will After Building Assets

As assets grow, protect your family with proper nomination and will.

Write a simple will after acquiring investment assets.

This avoids confusion and disputes among legal heirs.

A will ensures your money reaches the right people without delay.

Build Financial Literacy Bit by Bit

Read 1–2 good articles on personal finance every week.

Watch reliable financial channels only. Avoid noise from social media.

Don’t fall for hot tips, crypto hype or overnight wealth promises.

Basic financial knowledge helps you ask right questions to planners.

Finally

You are still young and time is with you.

Starting now with clarity and commitment is key.

You don’t need big amounts. You need regularity and discipline.

Stick to the plan. Track it. Adjust when needed.

Partner with a Certified Financial Planner to create a custom plan.

You can reach your retirement goal if you act today.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.