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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 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
Gaurav Question by Gaurav on Jul 10, 2024Hindi
Money

I am 42 of age.. Living with family, my wife, 2 kid, daughter 7 year old and son 1.5 year old.. I m jobless.. Wife salary 80k aftar tds and PF (10k per month )..if we having 70 lakh and one property which current value around 40 lakh...but i m jobless..Can we survive if plan for retirement in the age of 50..

Ans: First, let's assess where you stand financially. Your wife earns Rs 80,000 after TDS and PF. You have Rs 70 lakhs in savings and a property worth Rs 40 lakhs. With no current job, planning for retirement by age 50 is crucial.

Having a clear understanding of your financial situation helps in making better decisions for the future. You have a solid foundation, but with careful planning, we can ensure a comfortable retirement.

Evaluating Your Monthly Expenses
To plan effectively, we need to understand your monthly expenses. This includes rent, groceries, utilities, children's education, and any other recurring costs. Knowing this will help us see how much you need to sustain your current lifestyle.

Reducing unnecessary expenses can free up more money for investment. Every rupee saved today can grow significantly by the time you retire.

Income and Savings
Your wife's income is Rs 80,000 per month. This is your primary source of income. It's essential to save a portion of this income regularly. Aim to save at least 20-30% of this income every month.

Your current savings of Rs 70 lakhs provide a good buffer. However, these funds need to be invested wisely to grow over time and support your retirement goals.

Investment Options
Investing in mutual funds can be a wise decision. Mutual funds offer the potential for higher returns compared to traditional savings accounts. They are managed by professionals who aim to maximize returns while managing risks.

Mutual funds come in various categories: equity funds, debt funds, hybrid funds, and more. Each category has its own risk and return profile. It's essential to diversify your investments across different types of funds to balance risk and reward.

Benefits of Actively Managed Funds
Actively managed funds have fund managers who actively select stocks to beat the market. They adapt to market changes and aim for higher returns. The personalized approach can be more beneficial than passive index funds, which simply mirror the market.

Actively managed funds may have higher fees, but they also have the potential for higher returns. The expertise of fund managers can help in navigating market volatility and achieving better outcomes.

Power of Compounding
Investing early allows you to take advantage of compounding. Compounding is when your investment earns returns, and those returns earn more returns. The longer your money is invested, the more it can grow.

Starting now, even small amounts can grow significantly over time. Regular investments, even modest ones, can build a substantial retirement corpus.

Diversification
Diversification is spreading your investments across different asset classes to reduce risk. By not putting all your money into one type of investment, you can protect yourself from market volatility.

Invest in a mix of equity and debt funds. Equities provide growth potential, while debt funds offer stability. This balance helps in managing risk and ensuring steady returns.

Insurance Coverage
Ensure you have adequate insurance coverage. Life insurance is crucial to protect your family's financial future in case of an unforeseen event. Health insurance is also vital to cover medical expenses.

Review your current policies and assess if they meet your needs. Consider term insurance for life coverage and a comprehensive health insurance policy for medical expenses.

Emergency Fund
Having an emergency fund is essential. This fund should cover 6-12 months of your living expenses. It acts as a safety net in case of unexpected expenses or job loss.

Keep this fund in a liquid form, such as a savings account or a liquid mutual fund. This ensures you can access the money quickly when needed.

Education Fund for Children
Setting up an education fund for your children is important. Education costs are rising, and having a dedicated fund ensures you can provide for their future.

Invest in child-specific mutual funds or education plans. These plans are designed to grow your money over time and meet educational expenses when required.

Retirement Planning
Your goal is to retire by age 50. This means you have 8 years to build a retirement corpus. Calculate how much you will need to sustain your lifestyle post-retirement.

Consider factors like inflation, life expectancy, and desired lifestyle. A certified financial planner can help create a detailed retirement plan tailored to your needs.

Systematic Investment Plan (SIP)
A Systematic Investment Plan (SIP) is a disciplined way of investing. You invest a fixed amount regularly in mutual funds. This not only inculcates a saving habit but also averages out the cost of investment over time.

SIPs are flexible and can be started with a small amount. They are a great way to build wealth gradually and systematically.

Assessing Risks
Understand the risks involved in investing. Equity funds are subject to market risks, but they also offer higher returns. Debt funds are safer but offer lower returns.

Balancing your portfolio with a mix of equity and debt funds can help in managing risks. Regularly review your portfolio to ensure it aligns with your goals and risk tolerance.

Monitoring and Rebalancing
Regularly monitor your investments to track their performance. Rebalancing is adjusting your portfolio to maintain the desired asset allocation.

Market conditions change, and rebalancing helps in taking advantage of these changes. This ensures your investments are aligned with your financial goals.

Tax Planning
Effective tax planning helps in saving money. Invest in tax-saving instruments like Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), and others.

These investments not only help in saving taxes but also provide growth potential. Consult a certified financial planner to understand the best tax-saving options for you.

Utilizing Professional Help
A certified financial planner can provide personalized advice. They can help create a comprehensive financial plan, monitor your investments, and suggest adjustments.

Professional guidance ensures your financial decisions are well-informed and aligned with your goals. It also helps in staying disciplined and focused on your financial journey.

Lifestyle Adjustments
Consider making lifestyle adjustments to save more. Cutting down on non-essential expenses can free up more money for investments.

Living a modest lifestyle now can ensure a comfortable retirement later. Prioritize spending on necessities and save the rest for future needs.

Generating Additional Income
Look for ways to generate additional income. This could be through freelance work, part-time jobs, or monetizing a hobby.

Additional income streams can provide financial security and accelerate your investment goals. Be proactive in exploring opportunities to earn extra money.

Appreciating Your Efforts
Your efforts to plan for the future are commendable. It's not easy to manage finances, especially with current challenges.

Your determination to secure your family's future and plan for retirement is truly inspiring. Keep up the good work and stay focused on your goals.

Final Insights
Planning for retirement at age 50 requires careful planning and disciplined execution. With your current resources and wife's income, it's achievable.

Regular savings, smart investments, adequate insurance, and professional guidance are key. Stay committed to your plan, and you can enjoy a secure and comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
Asked on - Jul 11, 2024 | Answered on Jul 13, 2024
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My monthly exp around 60 k per month.. I have term policy, i already have LIC policy, around 5 lakh in pf and 2 lakh im share market... Can i invest 30% of corpus in a corporate fd with shri ram finance @9% ROI and rest where shud i diversify?
Ans: With monthly expenses of Rs. 60,000, a term policy, LIC policy, Rs. 5 lakh in PF, and Rs. 2 lakh in the share market, investing 30% of your corpus in a corporate FD with Shriram Finance at 9% ROI is a reasonable move for stability. Diversify the remaining 70% as follows:

Mutual Funds (40%): Split between equity (30%) and debt funds (10%) to balance growth and safety.
SIPs (20%): In high-performing equity mutual funds for regular and disciplined investment.
PPF/NPS (10%): For tax benefits and long-term growth.
This diversification balances risk and returns, ensuring financial stability and growth.

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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Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2024

Asked by Anonymous - Feb 20, 2024Hindi
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Hello Sir, I am 46 Y Old , and I lost my Job . I have 2 kids . One require money from 2024-2028 ( 6L per annum) other kid require money from 2028-2032. I saved and keep aside 60 L for their education . I have today 71 L of EPF . My wife earn 50 K per month which is sufficent for us to run the home and some money put in health insurance and term insurance. I will reinvest any interest earn from these two invest ments ( 60 L and 71 L). 60 L Break Up is 14.5 L Mumtual fund , 25L PPF maturing in 2026, 10 L Government Bond maturing in 2024 3.4 L NSC maturing in 2032, 2.3L gold bond, 2 L Shares, 4 L FD. Please let me know can I have retirement life with 70 K from interests earning if i do not get job.
Ans: It's understandable that you're concerned about your financial security after losing your job, especially with two children's education expenses to consider. Let's assess your current financial situation and retirement prospects:

Education Fund:

With 60 lakhs set aside for your children's education, you have a significant portion of their expenses covered. Ensure that these funds are invested appropriately to generate returns that align with the time horizon of their education needs.
EPF and Other Investments:

Your EPF corpus of 71 lakhs, along with your other investments in mutual funds, PPF, government bonds, NSC, gold bonds, shares, and FDs, forms a substantial part of your financial assets.
Review the performance and asset allocation of these investments to ensure they are diversified and positioned to provide growth and stability over the long term.
Retirement Planning:

With a monthly interest income target of 70,000 rupees, you'll need to calculate the rate of return required on your investments to achieve this goal. Given the current interest rate environment, it may be challenging to generate such high returns without taking on significant risk.
Consider consulting with a financial advisor to assess your risk tolerance, investment options, and retirement goals. They can help you develop a personalized retirement plan that balances risk and return effectively.
Contingency Planning:

While your wife's income covers household expenses, it's essential to have a contingency plan in case of unexpected expenses or emergencies. Maintain an emergency fund equivalent to 6-12 months' worth of living expenses to provide financial stability during challenging times.
Reassessing Retirement Income:

Depending solely on interest income from your investments for retirement may not be sufficient, especially considering inflation and rising living costs. Explore additional income streams or part-time work opportunities to supplement your retirement income.
In conclusion, while your current investments provide a solid foundation, achieving your retirement income target solely through interest earnings may require a review of your investment strategy and retirement goals. Consider seeking professional financial advice to optimize your portfolio and plan for a secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 2024

Asked by Anonymous - Jun 19, 2024Hindi
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I am 42 years old living with my wife 2 children of 7 years girl and 1 year boy.. Monthly salary around 1 lakh..monthly exp around 55-60 per month including one child study..we have around 70 lakh..one property with estimate value of 35 lakh..5 lakh in Pf...2 Lakh in stock market.although my job is not stable but also somehow atleast 60-70 I will earn either from job or small business till 52 age. What should I do to survive and want retirement @ 52-53 age...is it possible to survive for us with this situation.
Ans: At 42 years old, your goal of retiring at 52-53 with financial stability is achievable, given your current assets and income. Let's analyze your situation and outline a plan to secure your retirement.

Current Financial Position
Income and Expenses
Your monthly income is Rs. 1 lakh, and expenses are Rs. 55-60 thousand per month, including your child's education expenses. This leaves you with a manageable surplus for savings.

Assets
You have assets totaling around Rs. 70 lakhs, including a property valued at Rs. 35 lakhs, Rs. 5 lakhs in PF, and Rs. 2 lakhs in the stock market. These assets form a substantial base for your retirement planning.

Job Stability
Although your job isn't stable, you anticipate earning Rs. 60-70 thousand monthly until age 52 through either employment or a small business. This income projection adds to your financial security.

Retirement Planning Strategy
Build an Emergency Fund
Start by building an emergency fund. Aim for 6-12 months’ worth of expenses. This fund will safeguard your family in case of job fluctuations or unexpected expenses.

Invest Wisely
Diversified Investments
Invest your savings wisely. Diversify across assets like mutual funds, PPF, and possibly reallocation of stock market investments to reduce risk.

Avoid High-Risk Investments
Given your goal of retiring in 10-11 years, prioritize safer investments with moderate returns. Steer clear of high-risk ventures that could jeopardize your savings.

Child's Education Planning
Continue investing in your child's education. Plan systematically to cover future educational expenses, considering inflation and other financial obligations.

Retirement Corpus
Estimate Retirement Needs
Calculate your retirement needs based on current expenses and expected inflation. Factor in healthcare costs and lifestyle adjustments for accurate planning.

Regular Reviews
Regularly review and adjust your financial plan. Seek guidance from a Certified Financial Planner (CFP) to optimize investments and stay on track with retirement goals.

Family Security
Insurance Coverage
Ensure adequate insurance coverage for health and life. This protects your family against unforeseen medical expenses and provides financial support in case of any unfortunate event.

Estate Planning
Consider estate planning. Draft a will to secure your assets for your family's future. Consult a legal advisor for proper documentation.

Final Insights
With disciplined savings, strategic investments, and prudent financial planning, retiring at 52-53 is feasible for you. Maximize savings, diversify investments, and seek professional advice for optimal results. Your dedication to financial stability and family security will pave the way for a comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 02, 2024

Asked by Anonymous - Nov 01, 2024Hindi
Money
I am 51 yrs old with 6Cr in equities, 70 lakhs in cash n FDs. I have 2 houses (worth 1.5Cr in total) both self occupied as of now, with no debt. I have subcribed for Medical & Life insurance for a decent amount. My dependents are my wife 45 yrs and child of 14 yrs with 5 to 7 yrs of education left (either graduation or PG respectively). My monthly expenses are 15L to 18L currently. My equity portfolio is anticipated to grow at atleast 8+% pa. I am on sabatical for past 2 yrs with no pay due to some personal emergencies. Please let me know, if I can retire now, if i assume a life expectancy of say 85 yrs.
Ans: At 51, with an asset-rich profile, this is an excellent time to assess if you can retire comfortably. We’ll cover key areas to evaluate financial readiness for retirement based on your goals and resources.

Current Financial Standing and Expenses
Your financial profile reflects strong assets with Rs 6 crore in equities, Rs 70 lakh in cash and FDs, and two self-occupied properties worth Rs 1.5 crore. You also have medical and life insurance, which is crucial for family security.

Your monthly expenses are between Rs 15 lakh and Rs 18 lakh. Given this, retirement planning will focus on cash flow, inflation management, and legacy planning.

Income Needs and Investment Review
With no current income, a stable cash flow is essential. Let’s assess how your assets can serve as reliable income sources while providing growth to combat inflation.

Equity Portfolio (Rs 6 Crore): Assuming your portfolio grows at 8% annually, it’s important to manage risk by diversifying. Actively managed funds offer adaptability and the potential for higher returns over index funds, which lack downside protection. This will help maintain steady growth while protecting your capital.

Cash and FDs (Rs 70 Lakh): Cash and FDs offer liquidity but have low returns. At current inflation, they won’t retain much value long-term. Using these for short-term needs or emergencies is wise, but a better strategy is to structure withdrawals to avoid depleting reserves quickly.

Evaluating Monthly Cash Flow and Expense Coverage
Here’s a sustainable income plan to cover monthly expenses while growing your investments.

Systematic Withdrawal Plan (SWP): Set up an SWP from your mutual funds. This method allows regular withdrawals without depleting principal, offering flexibility for adjustments if your expenses change. A Certified Financial Planner can help you structure this for tax efficiency, as SWP gains above Rs 1.25 lakh incur 12.5% LTCG tax.

Debt Allocation for Stability: Consider adding high-quality debt funds, which provide moderate returns with stability. Avoid annuities, as they restrict flexibility and offer low returns. Debt funds allow you to adjust based on market conditions and withdraw as needed.

Dividend-Based Funds: Some mutual funds provide dividends. These funds provide periodic payouts, which you can use for monthly expenses. While not guaranteed, these funds complement other income sources.

Periodic Review of Cash Flow: Review your spending every 6 months. Adjust withdrawals based on market growth and expense needs to ensure your funds last through retirement.

Building an Inflation-Protected Investment Strategy
Rising expenses require a strategy to grow your portfolio beyond inflation. Equity and hybrid mutual funds provide growth, while debt funds add stability.

Balanced/Hybrid Mutual Funds: These funds combine equity for growth and debt for safety, fitting well for moderate-risk investors. They allow you to benefit from market growth with less volatility.

Flexible Asset Allocation: Actively managed funds let professional managers shift assets based on market conditions. This agility benefits portfolios more than index funds, which lack flexibility and could expose you to higher risks during market downturns.

Regular Monitoring of Portfolio: Annual reviews of asset allocation with a Certified Financial Planner will help you keep a balanced risk profile. Ensure your equity allocation is rebalanced as you age, protecting against market volatility.

Education Planning for Your Child’s Future
Your child’s education expenses will span the next 5–7 years, with possible costs for post-graduation as well.

Dedicated Education Fund: Start a dedicated fund for education. Allocate it toward balanced or equity mutual funds, which provide stability with potential for appreciation. Over the next few years, these funds can build enough to cover college or post-graduation costs.

Insurance as a Backup: Continue with your life and medical insurance to secure your family’s future, covering education costs if needed. A term insurance policy will ensure financial stability for your child’s education even in unforeseen circumstances.

Preparing for Health and Emergency Expenses
Health expenses can be unpredictable. With medical coverage in place, ensure that your assets are accessible when required.

Super Top-Up Health Insurance: If you anticipate higher medical costs, consider a super top-up plan to increase coverage without a significant premium hike.

Emergency Fund Allocation: Maintain a separate emergency fund in cash or a liquid fund. This fund should cover 6–12 months of expenses, providing quick access if your primary funds are temporarily inaccessible.

Tax-Efficient Withdrawals to Optimise Retirement Income
As you withdraw funds, a tax-efficient strategy will maximise your net income.

Staggered Withdrawals for Tax Minimisation: Avoid withdrawing large sums at once, as this could push you into a higher tax bracket. Systematic withdrawals over time are more tax-efficient.

Understand Mutual Fund Taxation: The new rules set LTCG tax at 12.5% for gains above Rs 1.25 lakh on equity funds, while STCG is taxed at 20%. Debt funds are taxed as per your income slab. Plan your withdrawals accordingly to optimise tax outcomes.

Indexation Benefit on Debt Funds: When selling debt funds, use indexation benefits to reduce tax liability. This will preserve your income and principal, ensuring you meet expenses effectively.

Final Insights
Your assets provide a solid foundation for retirement. By structuring withdrawals, diversifying investments, and planning tax-efficient strategies, you can secure a comfortable and inflation-protected retirement. Regular portfolio reviews and disciplined spending will be key in maintaining your lifestyle across the years.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,

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

..Read more

Latest Questions
T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
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Money
Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

...Read more

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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