For a 38 years employee , how much overall saving should be have at this age to be called financially stable

Ans: You are asking the right question at the right time. At 38, you are not too early and not too late. Many people only think of financial stability when they near retirement. You are ahead. That shows maturity and discipline. Financial stability at 38 depends on income, lifestyle, family needs, and future goals. There is no fixed one number for all. Still, certain guidelines and benchmarks can help you measure your own stability. Let us look at this from a 360-degree angle.

» Defining Financial Stability at 38
– Financial stability means freedom from money stress.
– It means you can handle job loss, medical needs, or education costs.
– It also means you are on track for retirement.
– At 38, you should have a mix of equity, debt, and safety corpus.
– You must be able to cover current needs and also save for future.

» Emergency Fund Requirement
– A stable person at 38 must hold an emergency fund.
– This should cover at least 6–12 months of expenses.
– It must be in liquid or ultra-short-term funds or bank savings.
– This gives peace of mind if income stops.
– Without this, one financial shock can disturb long-term plans.

» Insurance Protection
– Health cover is essential at this stage.
– Keep at least Rs.10–15 lakh family cover apart from company cover.
– Term insurance equal to 10–15 times annual income is ideal.
– This protects family if something happens to you.
– Review existing LIC, ULIP, or endowment plans.
– They usually give low returns.
– Better to surrender and reinvest in mutual funds for higher growth.
– Keep insurance and investment separate.

» Benchmark for Savings by 38
– A common benchmark is 3–4 times your annual salary.
– If your annual income is Rs.15 lakh, then savings of Rs.45–60 lakh is good.
– This includes retirement funds, mutual funds, FDs, PF, and gold.
– If you are above this mark, you are stable.
– If lower, you must increase saving rate.
– Remember, this is only a guide, not a fixed rule.

» Retirement Corpus Building
– At 38, you have around 20 years before retirement.
– This is the golden period to grow wealth.
– Equity mutual funds must form the core for retirement corpus.
– SIPs are the most effective way.
– Equity has power to beat inflation and multiply wealth.
– Debt mutual funds can support safety portion.
– Gold 5–10% adds hedge.
– Balance is important, not just chasing equity returns.

» Equity Mutual Funds Role
– Equity funds managed by professionals deliver strong growth over long term.
– Actively managed funds perform better than index funds.
– Index funds only copy the market.
– They cannot beat the market or protect downside.
– In India, active funds capture opportunities better.
– That is why active management with SIP discipline is more rewarding.

» Debt Allocation for Stability
– Debt funds provide cushion and liquidity.
– At 38, 20–30% in debt is advisable.
– Debt stabilises portfolio during market falls.
– FDs are safe but taxable.
– Debt funds give flexibility though taxation is as per income slab.
– Keep part of your corpus in debt for short goals.

» Gold Allocation
– Gold ETF or sovereign gold bonds are better than physical gold.
– Gold should be 5–10% of overall assets.
– It balances portfolio during uncertainty.
– It also helps during inflationary cycles.
– But too much gold drags overall growth.

» Retirement Funds and PF
– PF, EPF, and NPS should be continued with discipline.
– By 38, these should already form a healthy part of your assets.
– They give a guaranteed or semi-guaranteed base.
– This helps secure retirement lifestyle.
– Do not withdraw PF for short needs.
– Let it grow for future security.

» SIP Discipline
– At 38, SIP should be at least 25–35% of salary.
– This builds a large corpus over the next 20 years.
– Increase SIP amount with every salary hike.
– This ensures corpus grows faster than inflation.
– Never stop SIP during market fall.
– Those who stay invested during corrections build maximum wealth.

» Avoiding Low Yield Products
– Many people at 38 still hold endowment or ULIP policies.
– These mix insurance and investment.
– They give low returns and poor liquidity.
– You must surrender and shift to equity and debt mutual funds.
– Term insurance plus mutual funds is the best approach.

» Tax Planning and Wealth Protection
– Use tax benefits of NPS and ELSS wisely.
– ELSS gives growth and tax saving under 80C.
– But don’t invest only for tax saving.
– Look at long-term growth and alignment with goals.
– Plan redemptions carefully to avoid high taxation.
– For equity funds, long-term gains above Rs.1.25 lakh are taxed at 12.5%.
– Short-term equity gains are taxed at 20%.
– Debt fund gains taxed as per income slab.
– Plan systematic withdrawals to manage taxes in retirement.

» Goals at 38
– At this age, you may have goals like children’s education.
– Also home upgrade or retirement planning.
– Prioritise retirement above all.
– Education can be funded by targeted equity SIPs.
– Avoid breaking retirement savings for short goals.
– Keep goals separated by different investment buckets.

» Rental or Passive Income
– If you have any rental income, treat it as bonus.
– Do not depend fully on it for retirement planning.
– Use it for short goals or reinvest for compounding.
– Passive income adds flexibility and safety.

» Regular Funds and CFP Guidance
– Direct funds may look cheaper but are risky.
– You must monitor performance, rebalancing, and asset allocation alone.
– Most people fail in discipline and decision making.
– Regular funds with certified financial planner add value.
– CFP helps review goals, adjust allocation, and avoid mistakes.
– This guidance is far more valuable than saving on expense ratio.
– With professional review, chances of reaching goals increase.

» Behavioural Stability
– At 38, the biggest risk is behaviour, not markets.
– Many stop SIP during crisis.
– Many redeem equity for short-term needs.
– Some chase high-return products without understanding risk.
– Staying disciplined and patient is most important.
– Wealth grows silently with time and consistency.

» Finally
– At 38, financial stability means 3–4 times annual salary saved.
– You must also have 6–12 months of expenses in emergency fund.
– Equity must be the core engine for growth.
– Debt and gold balance risk and provide safety.
– Term and health cover protect family from shocks.
– Retirement corpus building must already be in progress.
– SIPs must be consistent and increasing with income.
– Avoid low yield products like ULIPs and endowment.
– Work with a certified financial planner for regular reviews.
– With this structure, you will be stable and future ready.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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