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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 08, 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

Asked by Anonymous - Aug 08, 2025Hindi

At 42, I've built a corpus of Rs 38 lakh spread across equity mutual funds, LIC policies, FDs, and monthly SIPs. But is it enough to retire by 60? How do I calculate my ideal retirement corpus, and what adjustments should I make to reduce taxes and ensure my portfolio beats inflation over the next 15 to 20 years?

Ans: You’ve done a great job building a Rs 38 lakh corpus by 42. That shows solid financial discipline. Your mix across mutual funds, LIC, FDs, and SIPs adds strength. Planning for retirement at 60 is a wise and timely decision. You still have 18 years ahead. That gives space to grow, adjust, and build further.

Let’s now assess your preparedness, calculate what’s ideal, and suggest adjustments to optimise growth, reduce tax, and beat inflation.

» Evaluating Your Current Position

– Rs 38 lakh at 42 is a great milestone.

– Your current savings cover safety, returns, and regular investment.

– But you still need to grow the corpus 5–6x by retirement.

– Inflation will eat into today’s value heavily over 18 years.

– Retirement life could last 30 years after age 60.

– Your current portfolio is a good base, but not enough.

– Let’s now understand how to estimate your ideal corpus.

» Calculating Your Ideal Retirement Corpus

– First, estimate your current monthly household expenses.

– Assume Rs 50,000 per month today.

– With 6% inflation, this becomes Rs 1.5 lakh per month at 60.

– You’ll need Rs 1.5 lakh x 12 = Rs 18 lakh yearly in retirement.

– For 25–30 years, that’s Rs 4 crore to Rs 5 crore in today's value.

– With inflation, you’ll need Rs 7 crore to Rs 8 crore actual corpus.

– This is the ballpark you should aim for by age 60.

– Your Rs 38 lakh is a strong start, but more is needed.

– Monthly SIPs, portfolio restructuring, and goal clarity will help.

» Issues in Your Current Portfolio Mix

– Your portfolio includes equity mutual funds, LIC, FDs, and SIPs.

– Equity mutual funds are great for long-term growth.

– LIC policies usually give low returns, often below 5%.

– FDs are safe, but returns are taxable and inflation-affected.

– LIC and FDs reduce long-term portfolio growth.

– SIPs are good, but the amount and allocation matter.

– You may be too conservative for long-term growth.

– You need to increase growth allocation for better wealth building.

» Action Plan for LIC and Traditional Insurance Policies

– If your LIC policies are traditional endowment or money-back types:

– Consider surrendering them after reviewing the surrender value.

– These plans give poor returns, not fit for wealth creation.

– Reinvest the proceeds in equity mutual funds through a certified MFD.

– Keep term insurance separate for life protection.

– Don’t mix insurance with investment.

– This one step alone can boost your retirement portfolio speed.

» Restructure Your FDs and Low-Yield Assets

– Long-term FDs don’t beat inflation after tax.

– Interest is fully taxable as per slab.

– Shift from FDs to debt mutual funds if holding period is long.

– Debt mutual funds offer better taxation when managed well.

– Returns can be similar to FDs but more tax-efficient.

– Use liquid or ultra-short-term funds for emergency or near-term goals.

– Avoid putting long-term money in FDs.

» Increase SIPs and Optimise Asset Allocation

– You’re already doing monthly SIPs. That’s excellent.

– Review the monthly SIP amount. Try to grow it yearly.

– At least 50% of your surplus should go into SIPs now.

– Use active mutual funds with expert fund managers.

– Avoid index funds as they just mimic the market.

– Index funds can’t adjust strategy in changing economic cycles.

– Actively managed funds aim to beat benchmarks with active selection.

– This gives better returns and less downside risk.

– Use regular mutual fund plans through an MFD with CFP.

– Direct funds lack personalised guidance and periodic review.

– MFD ensures right fund choice, regular tracking, and emotional support.

» Reduce Taxes Through Smart Fund Selection

– Use equity mutual funds for long-term tax efficiency.

– LTCG up to Rs 1.25 lakh is tax-free.

– Above that, taxed at 12.5% only.

– STCG is taxed at 20% flat.

– Debt mutual fund gains are taxed as per income slab.

– FDs are taxed fully, hence less tax-efficient.

– Use tax-saving equity mutual funds (ELSS) only for 80C need.

– Don’t invest in ELSS beyond 80C limit.

– ELSS has lock-in, so flexibility is low.

– Optimise SIPs in diversified equity and hybrid funds.

– Avoid products with long lock-ins unless goal-based.

» Protect Your Portfolio From Inflation

– Inflation is the biggest long-term threat.

– Rs 50,000 today will feel like Rs 2 lakh in 20 years.

– Your investments must grow faster than inflation.

– This is only possible with equity-focused portfolio.

– 65% to 70% of your long-term corpus should be equity-based.

– Rest can be in debt mutual funds or bonds.

– Asset allocation must shift gradually after 55.

– But now, growth should be your focus.

– Stay away from low-yielding assets in the accumulation phase.

» Add More SIP Buckets for Different Goals

– Retirement is one key goal, but not the only one.

– You may also have kids’ education, marriage, or personal dreams.

– Each goal should have a separate SIP bucket.

– Assign timelines and expected costs to each goal.

– Retirement goal should get highest priority now.

– Use a mix of large-cap, flexi-cap, and balanced advantage funds.

– Avoid theme-based or sectoral funds for retirement SIPs.

– Choose consistent performers with CFP-supported MFD advice.

– Stay invested during market ups and downs.

» Emergency Fund and Insurance Check

– Keep 6–9 months of expenses in liquid funds or SB account.

– This fund should not be part of investment portfolio.

– Keep separate term insurance equal to 12–15x annual income.

– Avoid new endowment or ULIP plans.

– Ensure you have a good health insurance plan for entire family.

– Don’t ignore insurance just because you have savings.

– Risk planning protects your financial journey from interruptions.

» Review and Rebalance Yearly

– Markets and goals change with time.

– Review asset allocation every year with your CFP.

– Shift from equity to debt slowly after 55.

– Keep tax impact low by staggering redemptions.

– Monitor your corpus growth yearly against your retirement target.

– Adjust SIPs or lump sums if there’s a shortfall.

– Avoid emotional decisions during market highs or lows.

– Stay consistent and focused on the retirement timeline.

» Avoid Real Estate, Annuities, and Illiquid Assets

– Don’t lock money into second property or land.

– Real estate is not flexible, liquid, or tax-efficient.

– Rental returns are low. Maintenance cost is high.

– Selling property is slow and uncertain.

– Annuities give low returns and no flexibility.

– Stick to mutual funds for growth and liquidity.

» What Happens Post Retirement?

– Build 3 buckets at age 60 – short, medium, and long-term.

– Short-term (1–2 years): debt funds or liquid for monthly income.

– Medium-term (3–7 years): conservative hybrid or balanced funds.

– Long-term (8+ years): equity mutual funds for growth.

– Withdraw from short-term first. Let equity bucket grow further.

– Use SWP (systematic withdrawal plans) for income.

– Don’t withdraw entire corpus at once.

– Plan withdrawals to reduce tax impact.

– Keep portfolio review active even after retirement.

» Final Insights

– You’ve made excellent progress so far. Rs 38 lakh at 42 is strong.

– But retirement is a long game. And needs bigger preparation.

– Shift focus towards high-growth investments through equity mutual funds.

– Increase monthly SIPs and remove low-growth assets like LIC and FDs.

– Use tax-efficient strategies to protect and grow your wealth.

– Beat inflation by keeping portfolio growth above 10% yearly.

– Use expert support from MFDs with CFP guidance.

– Don’t chase products. Stick to long-term plan.

– Review yearly. Stay flexible, but committed.

– Rs 7–8 crore retirement corpus is possible with the right strategy.

– The next 18 years will decide your comfort post 60.

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.