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44-Year-Old With 8.5 Cr. Invested, Aiming for Early Retirement: Is It Feasible?

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 04, 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
Asked by Anonymous - Nov 04, 2024Hindi
Money

Hi I am 44 years old and have 5 cr in FD,s , 1.5 cr in MF with over 1 lac monthly SIP investing in flexi cap , balanced fund , large caps, mid cap and small cap funds with an investment horizon of 10 years. Have 20 lacs in stocks , investing 7 lacs annually in annuity plan HDFC sanchay, and around 4 lacs in various insurance policies for tax free(ICICI and sriram) returns. Also I have started a sip(2k each ) for my 2 kids aged 5 and 12 in mid cap funds ..looking to increase this every year time horizon 30 years .. I would like to retire now and am looking at a swp of atleast 3-4 lacs per month after 6 years from my MF's. And annuity returns . Till that time my FD,s will also mature.. Would it be possible to earn 4 lacs through swp after 6 years...and I would like to build a corpus of around 30 cr after 15 years.. please suggest if I am on the right track.. Would it be possible to generate

Ans: Your current investments reflect thoughtful planning with multiple assets like mutual funds, FDs, annuities, and insurance. You are aiming for a substantial retirement corpus of Rs 30 crores and plan to generate a monthly income of Rs 3-4 lakhs through SWP in six years. Let's evaluate if you’re on track and explore recommendations to enhance your strategy.

1. Evaluating Your Mutual Fund Investments for SWP Needs
Your current SIPs are in flexi-cap, balanced, large-cap, mid-cap, and small-cap funds, which align well with your growth and SWP goals. Here’s how these investments can work towards achieving your objectives:

High-Return Potential in Equity Funds: Over 10 years, your equity-oriented funds (large-cap, mid-cap, small-cap) can provide growth, supporting your monthly withdrawal goals.

Balanced Funds for Stability: Balanced funds add stability to your portfolio, reducing market volatility's impact on withdrawals.

Flexi-Cap Diversification: Flexi-cap funds enhance flexibility, adjusting across large, mid, and small-cap stocks as per market conditions.

2. Systematic Withdrawal Plan (SWP) for Regular Monthly Income
Generating a SWP of Rs 3-4 lakhs after six years is achievable with a focused approach. Here’s a breakdown:

Establish a SWP Strategy: With a strong equity base, an SWP from your mutual funds can generate a monthly income. Reinvesting dividends or interest could further enhance your returns.

Aligning Fund Selection with SWP: Large-cap and balanced funds can be core SWP assets, as they are less volatile and provide stable growth.

Plan for Market Fluctuations: Market fluctuations could impact SWP withdrawals. You may consider moving a portion to debt funds closer to retirement for stability.

3. Increasing Your Kids' SIPs with Long-Term Vision
For your children, a 30-year horizon in mid-cap funds is promising. Increasing their SIPs regularly will amplify the impact of compounding:

Annual SIP Increase: Aim to raise the SIP amount yearly. Gradual increases, even by a few thousand rupees, can yield significant growth over 30 years.

Mid-Cap Growth Potential: Mid-cap funds can provide substantial returns over the long term. Diversifying with large-cap or flexi-cap funds could add stability.

Reinvestment in Tax-Efficient Funds: As your children reach different financial milestones, you can gradually move to tax-efficient funds or low-risk options for stability.

4. Reassessing Fixed Deposits and Annuities for Wealth Maximisation
Currently, a significant portion of your investments is in FDs and an annuity plan. Let’s evaluate the pros and cons of these investments:

Fixed Deposits for Short-Term Stability: FDs are stable but offer limited returns compared to mutual funds. Upon maturity, consider reinvesting in a mix of equity and debt mutual funds for higher growth potential.

Annuity Limitations: Annuity plans provide steady income but typically have lower returns. Since annuity returns are fixed, they may not keep up with inflation over the long term.

Shifting Focus to Equity Mutual Funds: Reinvesting your FD maturity and annuity corpus into mutual funds could help you achieve your Rs 30 crore target faster.

5. Optimising Insurance Plans for Better Returns
Your insurance plans provide tax-free returns, but it’s essential to assess whether they align with your overall goals. Here’s a perspective on your ICICI and Shriram policies:

Limited Growth in Traditional Insurance: Traditional insurance offers tax-free returns but often has limited growth potential.

Consider Surrendering for Higher Growth: If these policies underperform compared to mutual funds, you may consider surrendering them. Reinvesting in mutual funds could yield higher long-term returns.

Insurance for Protection, Not Investment: Moving towards term insurance for coverage and mutual funds for investment may be a more effective approach.

6. Building a Rs 30 Crore Corpus Over the Next 15 Years
Achieving a Rs 30 crore corpus in 15 years will require a strategic blend of high-growth investments. Here’s a suggested approach:

Focus on Equity Funds for Growth: Equity funds, especially mid and small-cap, can accelerate your portfolio growth. Increasing SIPs over time will enhance your corpus.

Reinvest Maturity Proceeds: As your FDs mature, reinvest them into equity and balanced mutual funds to benefit from compounding.

Balance with Debt Funds in Later Years: As you near your goal, gradually move funds to debt mutual funds. This will reduce risk and protect the corpus for withdrawal.

7. Disadvantages of Index Funds and Direct Plans
Although index funds and direct funds are popular, there are better options for your high-growth goals:

Index Funds’ Growth Limitation: Index funds simply track the market and don’t aim for higher returns. Actively managed funds, on the other hand, can outpace the market.

Direct Plans Lack Professional Guidance: With direct plans, there’s no personalised guidance. Investing through a Certified Financial Planner ensures regular monitoring and timely adjustments.

8. Tax Considerations on Mutual Fund Withdrawals
Tax-efficient planning is essential for maximising SWP returns:

Equity Fund Taxation: For equity mutual funds, LTCG over Rs 1.25 lakh is taxed at 12.5%. STCG is taxed at 20%. Plan withdrawals to stay within these limits for minimal tax impact.

Debt Fund Taxation: Debt mutual funds are taxed according to your tax slab. Using a mix of debt and equity can balance returns with lower taxes.

Final Insights
Your diversified portfolio places you on a solid path to a secure retirement and wealth creation. Increasing SIPs for your kids, reinvesting maturing FDs, and focusing on mutual funds over insurance and annuities will strengthen your approach. Working closely with a Certified Financial Planner will keep your investments aligned with your Rs 30 crore goal, ensuring a steady retirement income and lasting legacy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Asked on - Nov 05, 2024 | Answered on Nov 05, 2024
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Thank you for your valuable insight... Will surely start reinventing matres fds in MF... The annuity plans were for tax free returns Also have invested in PPF and sukanya samridhi 1.5 lacs each (since past 5 years) for tax free returns which I can used for my kids education when it matures
Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

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.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2024

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Dear Sir, I am 42yrs old and a regular investor of MF SIP plan. As of now I am investing 1 lakh per month in various MF SIP schemes and am willing to continue this for next 18 years till i retire. Apart from this I have below corpus available with myself FD - 2.83 cr MF - Fund value as of now - 70 lakh PPF + EPF - 45 lakh Loans - Nil House - 2 houses already (1 i stay and from another i get 23k rent per month) Medical Insurance - 10 lakh for family floater + corporate insurance from my company Life Insurance - Please advise will it be sufficient enough to accumulate a corpus of INR 10 cr by the next 18 years when i am retiring so that I can use the SWP method and live my life peacefully.
Ans: Financial Assessment and Recommendations

Current Financial Snapshot:

At 42 years old, you're making substantial investments in Mutual Fund SIPs, totaling 1 lakh per month. Additionally, you have a significant corpus from Fixed Deposits (FD), Mutual Funds (MF), Public Provident Fund (PPF), and Employees' Provident Fund (EPF). You also benefit from rental income and have adequate insurance coverage.

Goal Analysis:

Your primary goal is to accumulate a corpus of INR 10 crores by the time you retire in 18 years. This corpus will be used for a Systematic Withdrawal Plan (SWP) to maintain your lifestyle post-retirement.

Assessment and Recommendations:

SIP Investments:

Your consistent investment of 1 lakh per month in MF SIPs is commendable. Continue this disciplined approach as it will significantly contribute to your retirement corpus.
Corpus Analysis:

Your current corpus, including FDs, MFs, PPF, and EPF, is substantial and will continue to grow over the next 18 years.
Review the performance of your MF investments periodically and consider rebalancing if necessary to optimize returns.
Rental Income:

The rental income from your second house adds to your cash flow and can be reinvested to boost your retirement corpus further.
Insurance Coverage:

Your medical and life insurance coverage appears adequate for your family's needs. However, periodically review your policies to ensure they keep pace with inflation and changing life circumstances.
SWP Strategy:

When you retire, consider implementing a Systematic Withdrawal Plan (SWP) from your accumulated corpus to generate regular income.
Calculate the SWP amount based on your estimated expenses and projected returns from your investment portfolio.
Regular Review:

Continuously monitor the performance of your investments and adjust your strategy as needed to stay on track towards your retirement goal.
Consider consulting with a Certified Financial Planner (CFP) periodically to fine-tune your financial plan and ensure you're on the right path.
Emergency Fund:

Maintain an emergency fund equivalent to 6-12 months of living expenses in a liquid instrument to cover any unforeseen expenses.
Final Thoughts:

Given your disciplined savings, diversified investment portfolio, and rental income, you're well-positioned to achieve your retirement goal of accumulating a corpus of INR 10 crores. Stay focused on your long-term objectives, regularly review your financial plan, and seek professional guidance when needed to navigate any challenges along the way.

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 Sep 17, 2024

Asked by Anonymous - Sep 17, 2024Hindi
Money
Me and wife are 43 yrs old and plan to work until 70 but lets assume we work until 60. I plan to invest 2 lacs/month in SIP until 60 and post 60, i want to switch to SWP withdrawing close to 8 lacs/month for 17 yrs. I am not sure but i am getting corpus of 150cr by the age of 77 @12per annual return. Pease confirm if my calculation and thinking is correct. Also, is it practical to believe calculations of these investment calculators which shows such big number if we invest for longer period of time including SWP.
Ans: You've set out a comprehensive plan for your financial future, aiming to invest Rs 2 lakhs per month until you reach 60, followed by withdrawing Rs 8 lakhs per month post-retirement via an SWP (Systematic Withdrawal Plan). You're also projecting an annual return of 12% and estimating a corpus of Rs 150 crores by the age of 77. Let's take a close look at whether this plan is feasible and practical over the long term.

Appreciating Your Commitment and Financial Discipline

Firstly, your decision to work until 60 and invest Rs 2 lakhs monthly for the next 17 years is commendable. This kind of discipline and foresight is rare. You're also considering a systematic approach to withdrawing funds post-retirement, which reflects sound financial planning. Now, let's evaluate some key aspects to ensure your expectations are aligned with practical outcomes.

Evaluating Long-Term Projections: Reality vs Assumptions

It’s important to address the assumption of earning a consistent 12% annual return over 17 years. While equity markets have delivered such returns in the past, they are not guaranteed, especially over such a long period. The market's ups and downs could lower or even boost the returns, depending on how your investments are distributed among asset classes.

Historically, equity mutual funds have performed well over long periods, often giving returns between 10% and 15%. However, assuming a consistent 12% return for 17 years without any hiccups is optimistic.

Market fluctuations could reduce returns, especially if a recession or downturn hits close to your withdrawal phase. You need to stress-test your projections by considering both optimistic and conservative scenarios.

It's important to invest in a diversified portfolio, including large-cap, mid-cap, small-cap, and debt funds, to mitigate risks over a longer horizon.

Are Investment Calculators Reliable?

Investment calculators are useful tools for giving a ballpark figure, but they come with limitations. They often make simplified assumptions, such as constant returns and no market volatility.

Investment calculators don’t account for real-world market variability, inflation rates, or shifts in economic policy.

They also don’t include the impact of tax on withdrawals post-retirement, especially with SWP, where taxation could reduce your actual monthly income.

Instead of relying solely on calculators, it's better to consult with a Certified Financial Planner for projections that consider inflation, taxes, and changes in the market environment.

Reviewing SWP Plans and Their Practicality

Switching to an SWP at 60 and withdrawing Rs 8 lakhs monthly for 17 years sounds ambitious. An SWP can be a good strategy, but several factors need to be considered:

Market Volatility: During the withdrawal phase, market downturns can impact the corpus, leading to a faster depletion than expected. This is especially true in the initial years of retirement, known as sequence-of-return risk.

Inflation: While Rs 8 lakhs a month might sound adequate today, the impact of inflation over 17 years could significantly erode your purchasing power. It’s important to consider the inflation-adjusted value of your withdrawals.

Tax Implications: Withdrawals from SWP schemes are taxed based on capital gains. Over 17 years, these tax liabilities could accumulate, reducing your monthly income. Keep this in mind when planning your SWP amounts.

Managing Expectations: Rs 150 Crores Corpus

Accumulating Rs 150 crores by the age of 77 might be an over-optimistic projection. Although consistent investments over time can indeed generate substantial wealth, there are a few challenges to this goal:

Compounding Returns: While compounding is powerful, market volatility and inflation can curb its potential. A 12% annual return might not be consistently achievable for 34 years (17 years of investing + 17 years of withdrawing).

Post-Retirement Income: Rs 8 lakhs per month during retirement translates to Rs 96 lakhs annually. Over 17 years, this withdrawal would amount to Rs 16.32 crores. If your corpus doesn’t grow as expected, or if returns fall short of 12%, there could be a risk of the corpus depleting too quickly.

Realistic Projections: You may want to factor in more conservative return rates, such as 8% to 10%, to get a more practical estimate of your final corpus. Even with these conservative rates, you should still be able to accumulate a significant sum to support a comfortable retirement.

Active Fund Management vs Passive Investments

Since your plan involves long-term investments, it’s essential to evaluate the type of funds you're using. Actively managed funds typically offer the opportunity for higher returns than passive investments like index funds.

Disadvantages of Index Funds: Index funds, while low-cost, merely track the market, making them more suitable for short to medium-term goals. Over long periods, their returns could be lower than actively managed funds, which have the flexibility to adjust to market conditions.

Advantages of Actively Managed Funds: With actively managed funds, professional fund managers can shift your investments based on market dynamics, which is important for a long-term investor like yourself. This could help achieve your expected returns of 12% annually or close to it, especially if combined with a balanced asset allocation strategy.

The Importance of Regular Monitoring and Adjustments

Your goal of investing Rs 2 lakhs per month until 60 and then withdrawing Rs 8 lakhs per month sounds like a well-thought-out strategy. However, it's critical to review your plan regularly, especially as you near retirement. Regular monitoring and adjustments can help you stay on track.

Annual Reviews: Review your portfolio performance annually with your Certified Financial Planner. This will help ensure that you're still on track for your desired corpus and that your funds are performing as expected.

Adjusting for Life Changes: Consider any life changes such as health issues, job changes, or family commitments. These could impact your ability to save or the amount you need post-retirement.

Rebalancing: As you approach 60, you should gradually reduce your exposure to equity and shift towards debt funds to secure your corpus. This will minimize the risk of a significant loss just before retirement.

Final Insights

Your current plan to invest Rs 2 lakhs per month until 60 and switch to an SWP is well-structured but requires some fine-tuning.

Be cautious about assuming a consistent 12% return over 17 years. While it’s achievable in some market conditions, it’s better to plan with more conservative estimates.

Investment calculators can give a rough idea, but they often don’t account for inflation, market volatility, and taxes, which could significantly alter your final corpus.

An SWP can work, but you must consider the risks of market downturns, inflation, and taxation during the withdrawal phase. It’s wise to build a conservative withdrawal strategy.

Avoid relying too much on index funds or ETFs for long-term wealth accumulation. Actively managed funds will give you more flexibility to adjust to market conditions, offering potentially higher returns.

Finally, regular reviews and portfolio rebalancing will be crucial as you approach retirement. This ensures your strategy remains aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Sir i am currently in class 11 th and i just want to prepare for jee mains and advanced 2026 exam so give me some roadmap to achieve and also guide me for computer science
Ans: Shreya, I trust that you have already enrolled in a coaching center, whether it be online or in person, and have finished your eleventh syllabus. (1) If you have not yet created your own short-notes for the 11th syllabus that has been completed, prepare it and continue to revise them every three days until 2026, even after you have commenced studying the 12th syllabus in December 2024. (2) Review the questions that you have incorrectly answered or skipped in mock tests conducted by your Coaching Center and/or practiced independently. (3) In order to increase your rank/percentile by targeting computer science at a reputable college/institute, prioritize mathematics (although all three subjects are equally important). (4) You should be thorough with NCERT books, particularly those pertaining to chemistry, in conjunction with the materials provided by your coaching institute. (5) Have 1-2 reference books for each subject. Not exceeding two. (6) Review the questions that were incorrectly answered or skipped in your mock and practice exams and retake the test. It is advisable to maintain a distinct note-book for these types of questions, which should include answers and elucidating notes, in order to review them repeatedly for all three subjects. (7) Download the SYLLABUS of JEE Main 2025 (available on Google by searching for "JEE Main Information Bulletin") and print it out, as there will be no significant changes to the syllabus in 2026. Maintain it on your study table and continue to update the 11th syllabus chapters and concepts that you have covered to date by marking them with a checkmark. This will boost your confidence if you continue to update the same till November 2025. (8) A slight difference in Syllabus might be visible when you acquire the 2026 JEE Main / JEE Advanced Syllabus. The same can be resolved within 15 days to one month in 2025-26. (9) Increase your productivity by studying for 45 minutes to 1 hour, taking a 10-minute break, and then continuing for 45 minutes. (10) Take a 2-3 minute break every 45 minutes while practicing questions, whether offline or online. This break should consist of closing your eyes and taking long breaths to enhance your concentration and mental capacity. (11) Additionally, it is recommended that you acquire the 20-40 PREVIOUS years question paper book of JEE (Main & Advanced) from Amazon. Arihant's, Disha's, or MTG's publications are recommended. Once you have finished reading a chapter, practice and complete it to determine the extent to which you have comprehended the concepts and to identify areas that require improvement. (12) By October 2025, ensure that you have reviewed significantly more than 90% of the previous years questions. Your confidence will be further bolstered by this. (13) After the mock test is completed at your coaching center, clarify all incorrectly answered or ignored questions and continue to revise and practice them, as these types of questions will significantly disrupt your performance in the actual JEE. (14) If you are a regular school student, inquire with your class teacher about the minimum attendance requirement as outlined in the Board's regulations (State, CBSE, ICSE, etc.). Utilize the remaining 15% by taking time off and preparing for your JEE, if only 85% attendance is required. (15) THE MOST IMPORTANT Value Added Suggestion: Rather than solely relying on JEE, please participate in 5-7 entrance exams/counseling process with a JEE score for getting admission into any one of the private engineering colleges to have a variety of options to select the most suitable one. All the BEST for Your Prosperous Future.

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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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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.

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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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