Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 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

Question by Deepak on Jul 09, 2025Hindi

I am 36 Y old married. Both of us are working. We have a daughter who is in nursery. We have been saving a significant amount of our salary through SIPs since the last 4 yrs. Current expenses are 1.2 lac/m.Our joint after tax &PF salary is 4.5 lac/m. Currently we have a 1bhk in mumbai with outstanding loan of 46lac. These are our joint savings: For Retirement : 1.3 cr( including 50 lac in PF and NPS) For a 2nd home: 46 lac in MF. We intend to sell our first home to buy a new home. For Daughter's education for college and marriage: 36 Lac in MF plus 1.5 lac in Sukanya Samriddhi Cash &Liquid fund: 35 lac ( we piled up cash from Sep 2024 due to market conditions and job uncertainty) I feel fairly confident with my finances, but we are in a high risk job and we are saving with a conservative scenario of us both being out of job market. Could you please help us understand if we are on the right track in case we are forced to retire in the next 3-4 yrs. We currently save close to 2.9 lac monthly income

Ans: Your financial commitment and discipline is impressive. You are thinking ahead. That is rare and deserves appreciation. Let me help you assess your readiness if early retirement becomes necessary. We will look at all aspects—retirement, daughter’s goals, housing, risk readiness, investment optimisation and contingency planning.

# Monthly Cash Flow – Strong, but Needs Guardrails

– Joint take-home: Rs. 4.5 lakh/month
– Expenses: Rs. 1.2 lakh/month
– Monthly savings: Rs. 2.9 lakh/month

Your savings rate is excellent at ~65%.

But with high job insecurity, focus must now shift from aggressive accumulation to protection of existing corpus. Future income is uncertain. So each rupee saved needs a job.

# Retirement Corpus – Sensibly Built, Needs Further Strengthening

– Existing corpus: Rs. 1.3 crore (including Rs. 50 lakh in PF/NPS)
– Monthly contribution: Rs. 1–1.5 lakh (approx.)
– Time horizon: Possibly just 3–4 years to add more

If early retirement happens in 3–4 years, this corpus must serve you for 40+ years.

That’s a tall order.

You may be confident, but your current Rs. 1.3 crore is not enough if you both stop earning at age 40.

Action Steps
– Don’t touch this corpus for any other goals.
– Increase diversification within this corpus to include hybrid and conservative equity-oriented schemes.
– Use your monthly surplus to continue contributing to retirement. Prioritise this above housing goals.
– Monitor inflation-adjusted retirement needs assuming no income from 2028 onward.

# Daughter’s Goals – On Track, Needs More Structuring

– Corpus for education and marriage: Rs. 36 lakh in mutual funds + Rs. 1.5 lakh in SSY
– Time horizon: College in 14–15 years, marriage in 20–25 years

This corpus is reasonable for now, but can be inadequate for foreign education or inflation-adjusted marriage costs.

Recommendations
– SSY is fine; continue the same till she turns 15.
– Split mutual fund corpus between:

Child-specific hybrid funds (for college)

Long-term diversified equity (for marriage)
– Tag each MF to a specific purpose. Don’t keep it lumped.
– Review SIP exposure – don’t go overweight on small-cap or thematic funds.

You are on the right track. Just fine-tune the strategy for clarity and tax-efficiency.

# Real Estate Transition – Handle It With Caution

– Current property: 1BHK in Mumbai
– Outstanding home loan: Rs. 46 lakh
– Plan: Sell current home, buy new one

You are doing the right thing by avoiding taking additional debt for the new home. Selling before buying is financially sound.

Points to Evaluate
– Estimate the net sale proceeds after loan closure.
– If there’s a shortfall for new house, use part of the 46 lakh corpus set aside for second home.
– Do not divert funds from retirement or daughter’s goals for real estate upgrade.
– Avoid large loan commitments now. Don’t let EMI pressure compromise flexibility.

Keep housing within 30–35% of total asset base. Liquidity is more important.

# Liquidity and Emergency Reserves – Excellent Job Done

– Liquid fund and cash: Rs. 35 lakh
– Reason: Built due to market fears and job risk

This is a wise move. Very few people proactively build such buffers.

In your case, Rs. 35 lakh is a strong 2+ years' buffer. Keep it that way.

Suggestions
– Keep 50% in high-grade liquid or ultra-short debt funds (no credit risk)
– Keep rest in sweep-in FD or short-term bank deposits
– If job loss happens, this will help avoid breaking long-term investments

Avoid letting this money lie idle for long. After one year, if job stability returns, shift excess to goal-based funds.

# Risk of Job Loss – Preparedness is Sound, but Explore Backup Options

You are proactively planning for involuntary early retirement. That’s smart and rare.

You seem mentally and financially ready for the challenge. That’s a strong foundation.

Recommendations
– Use next 3–4 years to build multiple skill sets.
– Consider at least one alternative income stream: freelance, consulting, teaching, or business
– Keep one year’s worth of EMI and household expenses separately, outside investment portfolio
– Keep insurance (life + health) active till age 60 at least

The more self-reliant you become, the less you'll depend on employment post-40.

# Monthly Savings Allocation – Rebalance as You Approach Transition

At present, you’re saving nearly Rs. 2.9 lakh per month. That’s a massive accelerator.

Ideal Deployment Strategy
– Rs. 1 lakh for retirement-focused mutual funds (aggressive hybrid, flexi-cap, large & mid)
– Rs. 50,000 for daughter’s education and marriage goals
– Rs. 50,000 for second home if needed
– Rs. 90,000 to short-term debt/liquid for emergency fund topping

This approach keeps your key priorities covered without overexposure to any one risk.

Every saved rupee should have a goal and time frame.

# Portfolio Composition – Needs Review & Rebalancing

You’ve been investing in mutual funds through SIP for 4 years.

But no fund names are shared. So I’ll highlight general direction:

Review This:
– Are you over-invested in mid/small-cap funds?
– Do you hold multiple similar schemes (same category)?
– Do you have goal-wise buckets with asset allocation in place?

Preferred Structure (for someone with your profile)
– Retirement: 60% equity-oriented hybrid + 30% large-cap/flexi + 10% conservative hybrid
– Daughter’s goals: Mix of child-focused hybrid, balanced advantage, large-cap
– Second home: Low-duration debt + aggressive hybrid combo
– Emergency: Liquid, arbitrage, sweep FD

You must avoid overlapping schemes. Have 2–3 max per goal. Keep portfolio lean and efficient.

# Avoiding Common Mistakes – Stay Watchful

You’ve done better than most households. But success can lead to complacency. Watch out for:

– Over-confidence due to high current income
– Excessive focus on returns, ignoring downside risk
– Investing only in equity and ignoring debt allocation
– Relying on real estate as inflation hedge
– Ignoring inflation for daughter’s future needs
– Taking ULIPs, traditional insurance, or endowment policies

You haven’t mentioned ULIPs or LIC-type plans. If you hold any of them, consider surrendering and switching to well-structured mutual fund portfolios through a Certified Financial Planner and MFD.

# Why Not Direct Funds or Index Funds

You may be using direct plans or index funds. That sounds cheap, but isn’t always right.

Disadvantages of Index Funds
– Passive approach, no downside protection
– No flexibility to manage overvalued sectors
– Returns can stagnate during sideways markets
– No scope for alpha generation

Disadvantages of Direct Plans
– No regular monitoring or rebalancing support
– No behavioural coaching during market correction
– Missed opportunities in switching or portfolio alignment
– No customised guidance for goal mapping

Regular plans via an MFD and CFP ensure active handholding, ongoing rebalancing, and clarity. Cost is not a disadvantage if value is higher.

# Insurance – Important Checkpoint

You haven’t mentioned life or health insurance.

Please ensure the following:
– Life cover for both spouses (minimum 10x annual income)
– Health insurance for the whole family (Rs. 25–30 lakh)
– Separate accident and critical illness policies if not included in group insurance

Without insurance, one emergency can destroy the financial base. Please get this sorted immediately.

Finally

You’ve created a solid base. Your income, savings, and planning mindset are exceptional.

Still, the possibility of a job exit in 3–4 years demands serious readiness.

Do this in the next 6 months:
– Build a goal-specific MF structure
– Insure your family adequately
– Avoid real estate obsession
– Reinvest idle cash efficiently
– Create career backup options
– Engage a qualified CFP and MFD for ongoing advice

Early retirement is not easy, but with the foundation you’ve laid, it is absolutely possible.

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.