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Retirement Planning at 35: How a Father Can Secure His Future with 19LPA Salary?

Ramalingam

Ramalingam Kalirajan  |7228 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 19, 2024

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 03, 2024Hindi
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Hi, I have 35 years old, my in salary is 19LPA in hand. I have a fixed deposit of 2 lakh, 15k sip, 2L invested in stock, 2lakh and 4 lakh emergency fund I have a 2 years old daughter, I don't have any loan. how to plan my retirement

Ans: You are 35 years old with a monthly salary of Rs 19 lakhs per annum in hand. You have a fixed deposit of Rs 2 lakh, a SIP of Rs 15,000, Rs 2 lakh invested in stocks, and a Rs 4 lakh emergency fund. You also have a 2-year-old daughter and no loans.

Evaluating Your Financial Goals
Your primary goal is to plan for retirement. This involves determining how much you need to retire comfortably and creating a plan to achieve that goal.

Setting Retirement Goals
Retirement Age: Decide when you want to retire. Let's assume at age 60.
Post-Retirement Expenses: Estimate your monthly expenses during retirement. Factor in inflation.
Emergency Fund
You already have an emergency fund of Rs 4 lakh. This is a good start. Ensure it covers at least 6-12 months of expenses.

Maintain Adequate Coverage: Regularly update your emergency fund as your expenses grow.
Fixed Deposit
Your Rs 2 lakh fixed deposit provides a safety net but offers low returns.

Consider Alternatives: Higher returns options like debt mutual funds for better growth.
SIP (Systematic Investment Plan)
Your Rs 15,000 SIP is a disciplined approach to investing.

Increase SIP: As your income grows, increase your SIP amount. Aim for at least 20-30% of your salary in investments.
Stock Investments
You have Rs 2 lakh invested in stocks.

Diversify Portfolio: Ensure your stock investments are diversified to reduce risk.
Regular Review: Monitor and review your portfolio regularly.
Retirement Corpus Calculation
Estimate the corpus needed for retirement based on your current lifestyle and inflation.

Online Calculators: Use retirement calculators for precise estimates.
Investment Options
Mutual Funds
Mutual funds can provide good returns over the long term. Consider a mix of equity and debt funds.

Equity Funds: For long-term growth.
Debt Funds: For stability and income.
Public Provident Fund (PPF)
PPF is a safe investment with tax benefits. It offers good returns over the long term.

Invest Regularly: Maximize your PPF contributions annually.
National Pension System (NPS)
NPS is a retirement-focused investment option with tax benefits.

Regular Contributions: Invest regularly for long-term growth and retirement corpus.
Child's Education Fund
Start planning for your daughter's education early.

Education SIP: Set up a separate SIP for your daughter's education fund.
Child Plans: Consider child education plans for specific goals.
Insurance
Ensure you have adequate life and health insurance coverage.

Life Insurance: Term insurance to cover financial liabilities.
Health Insurance: Adequate health coverage for the family.
Tax Planning
Optimize your tax savings through various investment options.

Tax-saving Instruments: Utilize PPF, ELSS, and NPS for tax benefits.
Creating a Diversified Portfolio
A well-diversified portfolio reduces risk and enhances returns.

Asset Allocation: Allocate assets across equity, debt, and alternative investments based on risk tolerance.
Suggested Allocation
Equity Funds: 60% for long-term growth.
Debt Funds: 20% for stability.
PPF/NPS: 20% for retirement and tax benefits.
Regular Monitoring and Review
Regularly review and adjust your investment portfolio to ensure it aligns with your goals.

Annual Reviews: Review your portfolio and make adjustments annually.
Consult CFP: Work with a Certified Financial Planner for personalized advice.
Final Insights
Planning for retirement requires a disciplined and diversified approach. Increase your SIP, diversify investments, and utilize tax-saving instruments. Regularly review and adjust your portfolio to stay on track. Leverage the expertise of a Certified Financial Planner for optimal results.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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.
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Ramalingam

Ramalingam Kalirajan  |7228 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 11, 2024

Asked by Anonymous - Jun 11, 2024Hindi
Money
I am 36 years old, 18 Lacs in the share market. 15 lacs in the Mutual funds and 27 Lac of home loan for 10 years at my home town and leaving in the metro city with 28k rent. In terms of dependent I have with my wife and 3 year old daughter. How can I plan my retirement?I do have saving scheme like Ssy and PPF in these invest is not appropriate or planned
Ans: Planning for retirement is a crucial step towards ensuring financial stability in your later years. You have a good foundation with investments in the share market and mutual funds, but a comprehensive plan will help you achieve your goals effectively. Let's dive into a detailed analysis of your current situation and develop a strategic retirement plan.

Understanding Your Current Financial Position
You are 36 years old, living in a metro city with your wife and a 3-year-old daughter. You have a home loan, pay rent, and have investments in shares and mutual funds.

Assets and Liabilities
Share Market Investments: Rs 18 lakhs
Mutual Funds: Rs 15 lakhs
Home Loan: Rs 27 lakhs (10-year tenure)
Monthly Rent: Rs 28,000
Monthly Expenses and Income
Considering your rent and other household expenses, it's essential to plan your cash flow efficiently. Let's assume your monthly household expenses, excluding rent, are Rs 40,000.

Dependents
You have your wife and daughter as dependents. Planning for their future needs, including your daughter's education and marriage, is vital.

Strategic Planning for Retirement
Setting Retirement Goals
Desired Retirement Age: Let’s assume you aim to retire at 60.
Post-Retirement Monthly Expenses: Considering inflation, your current Rs 40,000 expenses will increase. Planning for Rs 1 lakh monthly post-retirement is prudent.
Retirement Corpus: To sustain Rs 1 lakh monthly for 20-30 years, a significant corpus is needed. Let's aim for Rs 5-6 crores.
Evaluating Current Investments
Share Market Investments
Your Rs 18 lakhs in shares is a good start. However, stock investments are volatile. Diversifying into stable instruments will reduce risk.

Mutual Funds
Your Rs 15 lakhs in mutual funds should be reviewed for performance and diversification. Actively managed funds can potentially offer higher returns than passive index funds.

Home Loan
A Rs 27 lakh home loan is a significant liability. Paying it off early can save interest costs and reduce financial stress.

Developing a Detailed Plan
Emergency Fund
Establish an emergency fund covering 6-12 months of expenses. This fund should be in a liquid or savings account.

Emergency Fund Amount: Rs 5-6 lakhs
Location: Savings account or liquid mutual fund
Home Loan Repayment
Prioritize paying off the home loan. Reducing this debt will free up resources for other investments.

Extra EMI Payments: Consider making extra EMI payments to reduce the tenure and interest burden.
Refinance Options: Explore refinancing the loan at a lower interest rate.
Systematic Investment Plan (SIP)
Continue or start SIPs in mutual funds. SIPs help in disciplined investing and rupee cost averaging.

Monthly SIP Amount: Allocate a portion of your income towards SIPs in equity and debt mutual funds.
Diversification: Ensure a mix of large-cap, mid-cap, and debt funds.
Child's Education and Marriage Planning
Start a dedicated investment plan for your daughter's education and marriage.

Education Corpus: Estimate future education costs and start investing in child-specific plans or equity funds.
Marriage Corpus: Begin a parallel investment for marriage expenses.
Retirement Corpus Building
Aggressively build your retirement corpus through a combination of equity, mutual funds, and PPF.

Equity Investments: Continue investing in shares but diversify to reduce risk.
Mutual Funds: Increase SIP contributions and opt for a balanced mix of equity and debt funds.
PPF and Other Schemes: Continue investing in PPF for stable returns and tax benefits.
Review and Rebalance Portfolio
Regularly review your portfolio to ensure it aligns with your goals. Rebalance to maintain the desired asset allocation.

Calculations and Projections
Home Loan Repayment
Assuming an interest rate of 8% on your Rs 27 lakh home loan with a 10-year tenure:

Current EMI: Approx. Rs 32,830
Interest Outflow: Reducing the tenure through extra payments can significantly lower interest costs.
SIP and Mutual Funds
Assuming an average return of 10% from equity mutual funds:

Current Mutual Fund Value: Rs 15 lakhs
Monthly SIP: Rs 20,000
Future Value (24 years): Using compound interest formula, your SIPs can grow substantially.
Retirement Corpus Projection
To achieve a Rs 5-6 crore corpus in 24 years, you need a strategic investment plan. Assuming a mixed portfolio return of 10-12%:

Current Investments: Rs 33 lakhs (shares + mutual funds)
Annual Addition: Rs 2.4 lakhs (Rs 20,000 SIP)
Future Value: Your investments can potentially grow to meet your retirement goals.
Benefits of Actively Managed Funds
Actively managed funds offer potential advantages over index funds:

Professional Management: Fund managers actively select stocks to outperform benchmarks.
Flexibility: They can adapt to market conditions, potentially reducing losses in downturns.
Higher Returns: With the right strategy, they can offer higher returns than passive funds.
Disadvantages of Direct Funds
Direct mutual funds have lower expense ratios but require more involvement:

Complexity: Investors must choose and manage funds themselves.
Time-Consuming: Keeping up with market trends and fund performance needs time.
Risk of Poor Choices: Without professional guidance, there’s a risk of poor investment decisions.
Importance of Professional Guidance
Investing through a Certified Financial Planner (CFP) can provide:

Tailored Advice: CFPs offer personalized plans based on your goals and risk tolerance.
Regular Monitoring: They track your investments and suggest timely adjustments.
Comprehensive Planning: CFPs help with tax, retirement, and estate planning.
Additional Financial Considerations
Insurance
Ensure adequate life and health insurance coverage. This protects your family in case of unforeseen events.

Life Insurance: Opt for term insurance covering at least 10-15 times your annual income.
Health Insurance: A comprehensive health plan covers medical expenses and safeguards savings.
Tax Planning
Efficient tax planning can save money and enhance your investment corpus.

Tax-Saving Investments: Utilize Section 80C for investments in PPF, ELSS, and other schemes.
Deductions: Avail deductions for home loan interest under Section 24(b).
Final Insights
Your financial journey towards retirement requires careful planning and disciplined investing. By focusing on paying off your home loan, building an emergency fund, and investing in a diversified portfolio, you can achieve your retirement goals. Regular reviews and adjustments, along with professional guidance, will ensure you stay on track.

By following this comprehensive strategy, you can secure a comfortable retirement and provide for your family's future needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7228 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 2024

Asked by Anonymous - Jul 03, 2024Hindi
Money
Hi i am 39 year old my in hand salary after tax is 51 lpm I have fixed deposit worth 80 lac ppf of 34 lac, I have own flat fully paid, mutual fund around 13 lac,10 lac emergency fund, my wife housewife and son is 3 year old, what can I do to plan my retirement my current yearly expense is around 9 lacs and I don't have any loan
Ans: Planning for retirement is crucial, and it's wonderful that you're thinking ahead. Let's create a comprehensive plan to ensure a comfortable and secure retirement for you and your family. I'll guide you through the steps and strategies needed, addressing various aspects of your financial situation.

Understanding Your Current Financial Situation
You have a strong financial foundation, which is great. Your current financial assets include:

Fixed Deposit: Rs. 80 lakh
PPF: Rs. 34 lakh
Mutual Funds: Rs. 13 lakh
Emergency Fund: Rs. 10 lakh
Fully Paid Flat
Your annual expenses are Rs. 9 lakh, and you have no loans. With these details in mind, we can create a solid retirement plan.

Setting Retirement Goals
First, let's set clear retirement goals. This includes determining the age you wish to retire, estimating your post-retirement expenses, and accounting for inflation.

Retirement Age: Let's assume you plan to retire at 60.
Post-Retirement Expenses: Estimating your expenses to increase with inflation, let's assume Rs. 12 lakh annually.
Your current expenses of Rs. 9 lakh will likely increase over time due to inflation. Planning for increased expenses ensures you won't fall short of funds during retirement.

Building a Retirement Corpus
To ensure a comfortable retirement, you need to build a substantial retirement corpus. Given your current financial assets and future goals, let's discuss how to achieve this.

Mutual Funds: A Key Investment
Mutual funds are a crucial part of your investment strategy. They offer diversification, professional management, and the potential for higher returns. Let's explore the categories of mutual funds and their benefits:

1. Equity Mutual Funds
Equity mutual funds invest in stocks. They have the potential for high returns but come with higher risk.

2. Debt Mutual Funds
Debt mutual funds invest in bonds and fixed income securities. They are safer but offer lower returns compared to equity funds.

3. Balanced or Hybrid Funds
These funds invest in both equity and debt, providing a balance of risk and return.

Advantages of Mutual Funds
Diversification: Mutual funds spread investments across various assets, reducing risk.
Professional Management: Experts manage your investments, aiming for the best returns.
Liquidity: You can easily buy or sell mutual fund units.
Compounding: Reinvesting returns can lead to significant growth over time.
Risk and Power of Compounding
Mutual funds come with market risks. However, long-term investments usually balance out short-term market fluctuations. The power of compounding significantly boosts your corpus over time. By reinvesting your returns, your money grows faster.

Disadvantages of Index Funds and Direct Funds
While index funds track market indices and come with lower fees, they lack the active management that can potentially outperform the market. Direct funds may save on commissions, but investing through a certified financial planner (CFP) provides valuable guidance and better fund selection.

Investing in Actively Managed Funds
Actively managed funds, chosen by an experienced CFP, often outperform index funds. A CFP’s expertise helps in selecting funds tailored to your financial goals and risk tolerance.

Structuring Your Investments
Now, let's structure your investments to build a robust retirement corpus.

Emergency Fund
You already have a Rs. 10 lakh emergency fund. Keep this in a liquid or ultra-short-term debt fund to ensure quick access.

Fixed Deposits and PPF
Your fixed deposit and PPF are safe investments. However, their returns may not outpace inflation in the long term. Consider moving a portion into higher-yielding investments like mutual funds.

Diversifying Your Mutual Fund Portfolio
Diversification is key. Spread your investments across various mutual funds:

Equity Funds: Allocate a significant portion to equity funds for higher returns.
Debt Funds: Invest in debt funds for stability and income.
Balanced Funds: Include balanced funds to mitigate risk while aiming for growth.
Systematic Investment Plan (SIP)
Investing through SIPs ensures disciplined investing and rupee cost averaging. This strategy reduces the impact of market volatility.

Reviewing and Rebalancing Your Portfolio
Regularly review and rebalance your portfolio. This ensures your investments stay aligned with your goals and risk tolerance. A CFP can provide ongoing guidance and adjustments.

Tax Planning
Effective tax planning maximizes your returns. Utilize tax-saving instruments and plan withdrawals to minimize tax liabilities.

Insurance Coverage
Ensure you have adequate insurance coverage:

Life Insurance: Protect your family’s future with sufficient life insurance.
Health Insurance: Adequate health insurance covers medical emergencies without draining your savings.
Retirement Income Streams
Plan for multiple income streams during retirement:

Systematic Withdrawal Plan (SWP): Use SWPs from mutual funds for regular income.
Dividends: Invest in dividend-paying funds or stocks.
Part-Time Work: Consider part-time work or consultancy for additional income.
Estate Planning
Estate planning ensures your assets are distributed as per your wishes. Prepare a will and consider trusts for efficient transfer of wealth.

Final Insights
Planning for retirement involves a multi-faceted approach. By diversifying your investments, utilizing mutual funds, and planning for tax efficiency, you can build a substantial retirement corpus. Regular reviews and adjustments with a CFP ensure you stay on track to achieve your retirement goals.

Conclusion
Planning your retirement requires careful consideration of various factors. By following the outlined strategies, you can ensure a comfortable and secure retirement for you and your family. Regularly consulting with a CFP will help you stay on track and make informed decisions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Asked by Anonymous - Dec 05, 2024Hindi
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I am 39 and married for 11 years now, my husband doesn't support me financially at all. My salary is more than him but I bought house my own and paying all EMIS, looking for all household expenses and also paying school fees and other expenses for my son. My husband looks after only his parents, spend all money on them. Earlier we used to live together in inlaws house but they have spending habits for luxury, cloths, food etc even though my husband earns very less and my father in law retired with no income they were not ready to compromise on their spending habits. Whatever they had received after their retirement they entirety spent on their daughters marriages with no money left. When I got married they asked for my salary and used to give them. Mine and my husband salary was not enough for them so they sold house without informing me, I insisted them to buy at least small house but did not agree and kept on spending money on their lavish life, foreign trips, food, cloths etc. also helped daughters to buy house, maintenance and their childrens study. But did not let their son live life as ask him to pay rent for their house, household and maintenance expenses and they spend their money on their own luxury. They asked for my salary even though they have money and just spending for luxury and not even thinking for our future. When I denied to give salary, they asked me leave their house and made me difficult to live with them doing harrasment and taunts so I decided to leave and buy new house.Now I am living with my son separately, when my husband came to know about my new house he came to stay with us by not even paying single rupee to me. I asked him several time for money he only pays one or two thousand saying I don't have money at all to give you. Not taking care of son, his studies, school fees, do not help me in anything. My in laws keep doing his brain wash against me so that he will not support me financially or anyway. He always listens to his parents and sisters. There is no husband wife relationship at all between us. Not sure how to deal with it.
Ans: First, recognize and honor the strength it has taken to come this far. Buying a home, raising your son, and managing the weight of these challenges on your own are significant accomplishments that reflect your resilience and determination. That said, a marriage is meant to be a partnership, and it’s clear that your husband’s lack of financial contribution and emotional support has created an imbalance that’s unsustainable.

It’s important to look at the patterns in your relationship with clarity. Your husband’s decisions seem to be heavily influenced by his family, and this loyalty, while not inherently wrong, appears to come at the expense of his commitment to you and your shared responsibilities. The fact that he contributes so little financially and emotionally while benefiting from your efforts shows a lack of fairness and respect in the relationship. His parents’ behavior and expectations have added further strain, undermining your marriage and creating an environment of resentment.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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