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Ramalingam Kalirajan |10881 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 gaurav on Jul 02, 2025Hindi

Hi, I am 37 year old, with 2 kids aged 8 year and 5 year. My monthly income is 4 lakh( Private sector). Expense are around 1 lakh, I live with my parent in their house, so no rent .I have a car loan of 9 lakh and no other debt. Investment are 2 lakh in stocks, 3 lakh in PF, 1 lakh in NPS. Two major investment are in property land,one is 20 Lakh and other is in 25 lakh in wife name. These are long term for kids future. How should I plan if I wish to retire by 50. As my salary nearly double in last year,so I haven't saved too much for future.

Ans: Understanding Your Current Financial Position
– You are 37 years old with Rs. 4 lakh monthly income.
– Expenses are Rs. 1 lakh monthly.
– You live in a family-owned home, so no rent burden.
– You have a car loan of Rs. 9 lakh.
– Investments include Rs. 2 lakh in stocks, Rs. 3 lakh in PF, and Rs. 1 lakh in NPS.
– You hold two land properties worth Rs. 20 lakh and Rs. 25 lakh (wife’s name).
– You wish to retire at 50, giving you 13 years to build wealth.
– Salary growth has been sharp recently, but savings haven't yet caught up.

Appreciating Your Positive Habits
– Living without rent is a strong enabler for wealth building.
– Your expense level is well-controlled at 25% of your income.
– You have stayed away from personal loans or credit card debt.
– The presence of EPF and NPS shows a foundation of discipline.

Areas That Need Immediate Attention
– Your liquid investments are low compared to income.
– Stock exposure is small and not diversified.
– PF and NPS are long-term but not enough for early retirement.
– Land is illiquid and won’t help in short or medium term.
– No mention of term insurance or medical cover yet.
– Car loan adds unnecessary monthly commitment.

Step 1: Establish Emergency Fund
– First, set up an emergency fund of Rs. 6 to 8 lakh.
– This is equal to six months of expenses plus EMIs.
– Use liquid mutual funds or sweep-in fixed deposits.
– Do not depend on stocks or real estate during an emergency.

Step 2: Protect Your Family First
– Buy a pure term insurance plan with Rs. 2 crore sum assured.
– Ensure the term covers you till age 60 or more.
– Keep annual premium below 1% of your income.
– Do not mix insurance with investment like ULIPs or endowment plans.
– For health cover, take a floater policy for you, wife, and kids.
– Also take individual policy for parents if not already done.

Step 3: Rework and Accelerate Investments
– Your surplus is Rs. 3 lakh monthly. That is powerful.
– Start SIPs in a mix of actively managed mutual funds.
– Use regular plans through an MFD who is also a Certified Financial Planner.
– Direct funds lack personalised guidance and after-sales support.
– Regular plans give you lifetime handholding, goal tracking, and rebalancing.
– Don’t get lured by 1% lower expense ratio of direct plans.
– Missteps in direct plans often cost more in losses.

Step 4: Strategic Mutual Fund Allocation
– Use large-cap, flexi-cap, mid-cap, and aggressive hybrid funds.
– Allocate higher weight to hybrid and flexi-cap in early years.
– Slowly increase mid and small-cap allocation over 5 years.
– Avoid index funds.
– Index funds fall fully during market crashes.
– No fund manager adjusts for market downturns.
– Actively managed funds give downside protection and long-term alpha.

Step 5: Reduce and Close Debt Quickly
– Car loan is a luxury debt, not asset-building.
– Aim to prepay it in the next 12 to 18 months.
– Redirect EMI outflow into SIPs after loan closure.
– Avoid taking any new loans for depreciating assets.
– For future car needs, save via SIP, not loans.

Step 6: Goal-Based Planning for Children
– Children’s higher education is 10 to 13 years away.
– Set clear target for each child’s education (Rs. 25 lakh or more).
– Invest separately for each child using dedicated mutual fund SIPs.
– Use hybrid or balanced advantage funds in initial years.
– Move to conservative hybrid or short-term debt funds from age 15.
– Real estate cannot be used easily to pay college fees.
– Don’t rely on selling land for time-bound goals.

Step 7: Plan for Early Retirement at 50
– You have 13 active income years. Use them smartly.
– Create two buckets: one for retirement corpus and one for pre-retirement goals.
– Allocate minimum Rs. 1.5 to 2 lakh monthly for retirement.
– Increase SIPs every year with salary hike by at least 10%.
– Use only equity mutual funds and aggressive hybrid funds for this.
– From age 47, slowly move some money to conservative hybrid funds.
– After 50, use SWP (Systematic Withdrawal Plan) to draw monthly income.

Step 8: Consider Retirement Lifestyle
– Target monthly income of Rs. 1.5 lakh in retirement (inflation adjusted).
– You need a retirement corpus of approx. Rs. 4 to 5 crore.
– This corpus must last 35+ years post retirement.
– Relying only on PF and NPS will not suffice.
– They will cover less than 20% of your future needs.
– Hence, focus on mutual funds for wealth creation.

Step 9: Use Real Estate Only for Legacy or Passive Use
– You hold two land parcels, one in your wife’s name.
– They are not liquid and can’t help in education or retirement.
– Do not plan short-term goals based on selling land.
– Keep them as long-term legacy assets.
– Ensure proper legal documentation and nomination is in place.
– If you plan to sell one, do it early and invest proceeds into mutual funds.

Step 10: Avoid These Common Mistakes
– Don’t invest in insurance-linked plans.
– Don’t go for annuities as retirement products.
– Don’t put money into low-return FDs for long term.
– Don’t delay investment waiting for right market timing.
– Don’t mix emotional decisions with financial goals.
– Avoid buying more real estate for investment purpose.
– Don’t invest in products you don’t understand fully.

Step 11: Review Your Plan Every Year
– Review SIPs, insurance, and debt every 12 months.
– Adjust asset allocation based on age and goals.
– Rebalance mutual funds as advised by your MFD/CFP.
– Use family discussions to align financial goals.
– Keep nominations updated for all investments.
– Don’t skip annual health and term insurance renewal.

Step 12: Secure Wife's Financial Participation
– Wife’s name is on one land, but no mention of income or investments.
– Ensure she has her own term and health cover.
– Begin SIPs in her name also if she has no income.
– It brings tax efficiency and asset diversification.
– Include her in all financial planning discussions.
– Educate her on mutual funds, banking, and insurance basics.

Step 13: Tax Efficiency and Smart Withdrawals
– Equity mutual funds: LTCG above Rs. 1.25 lakh taxed at 12.5%.
– STCG is taxed at 20%.
– Debt mutual funds: gains taxed as per income tax slab.
– Keep track of holding periods while redeeming.
– Use SWP from mutual funds to get tax-efficient income post-retirement.
– Avoid high tax payout by premature redemptions.

Step 14: Create a Clear Written Financial Plan
– List down all goals with target dates.
– Include retirement, education, travel, health, and contingency.
– Discuss this with a Certified Financial Planner (CFP).
– CFP will create a personalised plan based on risk profile.
– Choose an MFD with CFP qualification for investments.
– They bring clarity, long-term tracking, and professional advice.

Final Insights
– You are in a powerful position to shape your financial future.
– Your income, savings capacity, and family setup are ideal for building wealth.
– But you must act now and act wisely.
– Focus on liquidity, protection, and structured investments.
– Move beyond land and stocks alone.
– Keep long-term vision and stick to disciplined investing.
– Don’t hesitate to take expert help from a Certified Financial Planner.
– Start now, stay consistent, and you can retire early with peace.

Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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