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36 Year Old With Savings of Rs.1.95 Cr Seeks Retirement Advice

Ramalingam

Ramalingam Kalirajan  |7953 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 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 04, 2024Hindi
Money

Dear Sir, I am 36 year old working in a private company in mumbai, my monthly expenses excluding rent is 65,000. My yearly gross income is 30 lakhs, and i could save 6 lakhs per annum. i have the following savings : 1.6 Cr in direct equity, 10 lakhs in mutual funds, 25 lakhs in FD, I own a 3 bhk flat which is put out on rent for monthly 25,000 income. Assuming i maintain the same lifestyle, how long should i work to retire?

Ans: At 36, you’re in a strong financial position, working in a private company in Mumbai. Your monthly expenses are Rs 65,000, excluding rent, and you manage to save Rs 6 lakhs per annum. Your savings and investments include Rs 1.6 crore in direct equity, Rs 10 lakhs in mutual funds, and Rs 25 lakhs in fixed deposits. Additionally, you own a 3 BHK flat that generates Rs 25,000 per month in rental income.

Assessing Your Retirement Needs
To determine how long you need to work before retiring, it’s essential to understand your retirement needs. Maintaining your current lifestyle post-retirement will require careful planning to ensure that your expenses are covered without compromising your standard of living. Here are some key factors to consider:

Monthly Expenses and Lifestyle
Your current monthly expenses are Rs 65,000. Post-retirement, you might need to adjust for inflation, healthcare costs, travel, and leisure activities. Planning for these expenses is crucial to avoid financial shortfalls.

Inflation Impact
Inflation erodes purchasing power over time. Assuming an average inflation rate of 6-7%, your expenses will double approximately every 10-12 years. This means your current expenses of Rs 65,000 might be around Rs 1.3 lakhs per month in 12 years. It’s vital to factor in inflation to ensure your retirement corpus can sustain your lifestyle.

Current Savings and Investments
Your diverse investment portfolio is impressive. Here’s a breakdown of your current savings and investments:

Rs 1.6 crore in direct equity
Rs 10 lakhs in mutual funds
Rs 25 lakhs in fixed deposits
Rs 25,000 monthly rental income from your 3 BHK flat
Direct Equity Investments
Your significant investment in direct equity suggests a strong appetite for risk and potential high returns. While direct equity can yield substantial growth, it also comes with market volatility. As you approach retirement, gradually shifting a portion of these funds to safer investments will help protect your capital.

Mutual Funds
With Rs 10 lakhs in mutual funds, you have diversified your investments to reduce risk. Actively managed mutual funds, in particular, offer professional management and the potential for higher returns. Avoiding index funds is wise, as they may underperform in volatile markets. Regular funds, managed by professionals, can provide better returns and flexibility.

Fixed Deposits
Your Rs 25 lakhs in fixed deposits offer stability and assured returns. Though FD rates may not always outpace inflation, they provide a reliable income stream. As retirement approaches, increasing your allocation to fixed deposits or other safe instruments can secure your financial future.

Rental Income
Your 3 BHK flat generating Rs 25,000 per month in rental income adds to your financial stability. However, consider potential fluctuations in rental demand and property maintenance costs. Diversifying your income streams can reduce dependency on any single source and provide financial resilience.

Healthcare and Insurance
Healthcare costs can significantly impact your retirement corpus. Ensuring you have adequate health insurance coverage is essential. Review your current policies and consider enhancing your coverage if necessary. Life insurance policies should also be evaluated to align with your financial goals. Surrendering investment-cum-insurance policies like ULIPs or LIC plans and reinvesting in mutual funds can yield better returns and flexibility.

Estimating Your Retirement Corpus
To estimate your required retirement corpus, consider the following:

Your annual expenses adjusted for inflation
Expected lifespan (planning till age 85-90 is prudent)
Expected returns on your investments
Without specific calculations, a diversified portfolio that includes equity, debt, and other instruments is essential. A Certified Financial Planner can help design a portfolio balancing growth and safety, ensuring your corpus lasts throughout your retirement.

Transitioning to a Safer Portfolio
As you approach retirement, transitioning to a safer investment portfolio is crucial. This involves gradually reducing exposure to high-risk investments like direct equity and increasing allocations to safer options like fixed deposits, debt mutual funds, and government schemes. This shift helps protect your corpus from market volatility and provides a stable income stream.

Generating Post-Retirement Income
After retiring, generating a stable post-retirement income is essential. Your rental income, coupled with returns from a well-diversified investment portfolio, can provide the necessary funds. Consider systematic withdrawal plans (SWPs) from mutual funds, and other instruments that offer regular income. Balancing your withdrawals to ensure your corpus lasts is key to a comfortable retirement.

Working with a Certified Financial Planner
Engaging a Certified Financial Planner can provide personalized guidance tailored to your unique financial situation. A CFP can help assess your current financial health, project future needs, and design a strategy to achieve your retirement goals. Regular reviews with your CFP ensure your plan adapts to any changes in your financial circumstances or goals.


You’ve done an excellent job of saving and investing. Your disciplined approach and diverse portfolio demonstrate a strong commitment to your financial future. It’s evident you’ve put significant thought into your retirement planning. With a few strategic adjustments and continued focus, you’re well on your way to a secure and comfortable retirement.

Final Insights
To summarize, you’re on a solid financial footing. Continue saving diligently and consider gradually shifting your portfolio towards safer investments as you near retirement. Engage with a Certified Financial Planner to refine your strategy and ensure you’re on track to meet your retirement goals. With careful planning and disciplined execution, you can achieve a comfortable and financially secure retirement.

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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Hello I want to retire early with 1 L monthy income . I am 46 right now . My investment are 2 Flats ( NO Home Loan) and 1 Villa ( 1.17 CR Home loan ) . Flat 1 Value -80 L self occupied, Flat 2 - 70 L ( Will be getting in May - Then Put on rent approx 25 K ) Villa 1.5 Cr under consruction , Home loan 20 Years. I Have Savings 65 L EPF , 25 L Mutual Funds, 20 L FD , 10 L govt Bond , 26 L PF , 3.4 L NSC. I invest per month 50 K in Mutual funds, 20 K PF (My self and wife).I pay Home loan EMI 1.07 L . I want 1 Cr for my Daughter and Son studyand marriage and I want 1 L per month . How much more time I have to do job to reach these goals and any additional investment .
Ans: Based on the information provided, here's an assessment of your current financial situation and retirement goals:

Retirement Income: You aim to achieve a monthly income of 1 lakh after retiring early. To achieve this, you'll need to calculate the corpus required to generate this income through investments like mutual funds, FDs, or rental income from properties.

Daughter and Son's Goals: You aim to accumulate 1 crore for your children's education and marriage expenses. You can calculate the required monthly investment to achieve this goal based on their current ages, expected expenses, and the investment horizon.

Additional Investments: You're already investing 50k per month in mutual funds and 20k per month in PF, which is commendable. However, you may consider increasing your monthly investments to accelerate wealth accumulation, especially for your retirement and children's goals.

Retirement Planning: Given your current investments, expenses, and goals, you may need to continue working for a few more years to build a sufficient corpus for early retirement. A financial advisor can help you create a detailed retirement plan considering various factors like inflation, returns on investments, and lifestyle expenses.

Asset Allocation: Review your asset allocation to ensure it aligns with your risk tolerance and investment objectives. Consider diversifying your portfolio across different asset classes to minimize risk and optimize returns.

It's essential to consult with a financial advisor who can create a customized financial plan tailored to your specific needs and goals. They can help you make informed decisions, optimize your investments, and achieve financial independence at the earliest possible time.

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Asked by Anonymous - Apr 29, 2024Hindi
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Hi, I am currently 43 years old. I would like to understand when I can retire. Here are my assets and savings. Have got 2 flats, one self occupied and other one rented for 25k per month. I have plot worth 80 lakhs. 20 lakhs in savings, still not invested anywhere. Another 50L in PF and gratuity. Have 2 ancestral homes generating 35k per month rent (worth 3 cr). My current salary is 2.5 lakhs per month after all deductions. We have two sons.
Ans: It's fantastic that you're planning ahead for your retirement! With your diverse assets and savings, you're well-positioned to achieve your retirement goals. Let's assess your situation to determine when retirement might be feasible:
1. Evaluate Assets and Savings: You have two flats, one rented out, a valuable plot, significant savings, and substantial funds in PF and gratuity. Additionally, rental income from ancestral homes provides a steady stream of income.
2. Calculate Expenses: Determine your current expenses and estimate future expenses, considering inflation and lifestyle changes. With rental income and other sources, you seem to have a stable income stream.
3. Financial Independence: Assess your financial independence by comparing your passive income from assets and savings with your expenses. If your passive income covers or exceeds your expenses, you're in a position to retire.
4. Consider Family Needs: Take into account your sons' education, marriage expenses, and other familial responsibilities. Ensure your retirement plan accommodates these needs without compromising your financial security.
5. Risk Management: While real estate can provide steady income, ensure you have a diversified investment portfolio to mitigate risk. Consider consulting with a Certified Financial Planner to optimize your asset allocation and investment strategy.
6. Retirement Timeline: Based on your current financial situation and retirement goals, you may be able to retire earlier than the standard retirement age. However, it's essential to consider factors like healthcare costs, longevity, and inflation when planning for retirement.
7. Regular Reviews: Periodically review your financial plan and retirement goals to ensure you're on track. Adjust your strategy as needed based on changes in your circumstances and market conditions.
With careful planning and prudent financial management, you can retire comfortably and enjoy the fruits of your hard work. Consider seeking professional advice to fine-tune your retirement plan and make informed decisions.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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I am 54 years. wnats to retire as early as possible. Have a housing loan of 70 lacs.. EMI is 80K every month. My monthly expenses is 70K. I have mutual funds /PF etc of app Rs 1.50 cr.. I want to clear my loan from the funds which I am having. Thereafter I will left with 80 lacs. I have two childerns. After 8-10 years I will requre funds for marrying both. My monthly in hand is app Rs 1.90 lacs.. For How many years will I have to work/or how much funds should i have to see that I have funds to marry my childerns and to met my monthly expenses once i retire
Ans: Your financial situation reflects thoughtful planning and steady savings. Let's assess your assets, liabilities, and goals for an early retirement.

Key Details of Your Financial Status
Housing Loan: Rs. 70 lakh housing loan with an EMI of Rs. 80,000 per month.

Monthly Expenses: Rs. 70,000 per month for regular living expenses.

Current Investments: Mutual funds and PF of Rs. 1.50 crore.

Funds Post Loan Clearance: Rs. 80 lakh remaining after clearing the loan.

Monthly Income: Rs. 1.90 lakh in-hand income.

Upcoming Responsibilities: Marriage expenses for two children in 8–10 years.

Evaluating the Housing Loan Decision
Clearing the housing loan now reduces debt burden but impacts your liquidity.

Rs. 70 lakh repayment will leave you with Rs. 80 lakh in investments.

Retain emergency funds for unforeseen expenses after loan repayment.

Once EMI stops, Rs. 80,000 will be available monthly for investments or savings.

Key Goals to Address
Retirement Planning: Ensure your corpus supports expenses after retirement.

Children's Marriages: Allocate funds for both weddings within 8–10 years.

Monthly Expenses Post Retirement: Maintain Rs. 70,000 adjusted for inflation.

Steps for Managing Funds After Loan Clearance
Emergency Fund Setup: Keep Rs. 10 lakh in a liquid fund for emergencies.

Diversify Remaining Funds: Divide Rs. 70 lakh into equity, hybrid, and debt funds.

Future Marriage Goals: Invest Rs. 30 lakh specifically for children's marriage expenses.

Retirement Corpus Growth: Use the remaining Rs. 40 lakh for retirement-focused investments.

Monthly Savings Post-Loan
After loan repayment, you save Rs. 80,000 EMI monthly.

Combine this with Rs. 40,000 (from Rs. 1.90 lakh income after expenses).

Total Rs. 1.20 lakh can be invested monthly for retirement and future goals.

Suggested Investment Allocation
Equity Mutual Funds: Allocate 60% of monthly savings for long-term growth.

Hybrid Mutual Funds: Allocate 20% for a balance of growth and stability.

Debt Funds: Allocate 20% for safer, predictable returns.

Goal-Based SIPs: Create separate SIPs for retirement and marriage goals.

Retirement Corpus Estimation
Aim for a corpus that generates Rs. 70,000 monthly, adjusted for inflation.

Plan for a 30-year retirement, assuming early retirement at age 55–57.

Factor in rising medical costs, lifestyle changes, and unforeseen expenses.

Taxation Considerations
Equity mutual funds' LTCG above Rs. 1.25 lakh is taxed at 12.5%.

Debt mutual funds are taxed as per your income tax slab.

Invest strategically to minimise tax liabilities while maximising returns.

Children's Marriage Planning
Allocate Rs. 30 lakh across equity and balanced funds for this goal.

Ensure growth-oriented investments to meet inflation-adjusted costs.

Withdraw gradually closer to the marriage dates to avoid market volatility.

Suggestions for Early Retirement
Continue working for 3–5 years to build a stronger retirement corpus.

This allows you to grow investments and plan for children's weddings.

Focus on reducing liabilities, increasing savings, and investing wisely.

Protection for Your Family
Health Insurance: Increase family coverage to Rs. 20–25 lakh.

Life Insurance: Ensure adequate coverage, at least 10 times your annual income.

Will and Estate Planning: Secure your wealth distribution legally.

Final Insights
Clearing your housing loan now can simplify your finances. However, focus on balancing liquidity for future goals. Continue working for a few more years to strengthen your retirement corpus. A well-structured investment plan can help meet your children’s marriage expenses and ensure a comfortable retired life.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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Why do Debt Funds offer lower returns as compared to Equity Mutual Funds?
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Below are the key reasons why debt funds provide lower returns than equity funds.

1. Nature of Underlying Investments
Debt funds invest in bonds, government securities, corporate debt, and fixed-income instruments.

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Equity mutual funds invest in company stocks, which have the potential for higher capital appreciation over time.

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Equity funds are less impacted by interest rate changes and benefit from economic growth.

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7. Market Performance
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Debt fund returns depend on interest rate cycles, making them less rewarding in growth periods.

Equities have historically outperformed debt over longer durations.

Finally
Debt funds provide safety and stability but offer lower returns.

Equity mutual funds outperform over time due to business expansion and compounding.

A well-balanced portfolio should include both debt and equity, based on financial goals.

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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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