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Can I retire comfortably with a 16-year government job, a 3 lakh salary, and a 5 crore corpus goal?

Milind

Milind Vadjikar  |683 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 06, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
vengadesh Question by vengadesh on Nov 06, 2024Hindi
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Hi.. i am 44 now , working in govt, getting a gross salary of 3 Lakhs per month..in hand 2 lakhs after deduction HRA and income tax.. i am eligible for pension. I want to get 3 lakhs per month after retirement and also want to build a corpus of 5 crores .. 16 years service left. Please suggest .. i can save 1 lakh/month from june 2025. As of now if i retire i will get 1 lakh per month as pension. but planning to retire after 60 years

Ans: Hello;

You may begin a monthly sip into a combination of pure equity mutual funds (70 K) and hybrid funds like balanced advantage and multi asset funds(30 K).

This mix may yield you a corpus of 5.36 Cr after 16 years.(Returns from pure equity mutual funds are assumed at 12% and from hybrid mutual funds at 9%)

If you use this corpus to buy an immediate annuity from a life insurance company it may provide you a monthly payout of around 2 L (post-tax).(6.5% annuity rate considered)

This coupled with your pension of 1 L+ will ensure monthly income of 3 L+ in retirement.

As you reach closer to your retirement please ensure to transfer your gains to liquid or ultra short duration debt funds to protect it against market volatility.

Ensure a good critical illness cover, in retirement, despite Govt health schemes.

Happy Investing;
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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Asked by Anonymous - Sep 24, 2023Hindi
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Hi sir, I am 32 year old earning 42 LPA. I have 20 lakhs invested in stocks (expecting 15% return), 17 lakhs in mutual funds (expecting 12% return), 13 lakhs in PF (expecting 8% return), 3 lakhs in PPF (expecting 7.1% return), 2 lakhs in govt. bonds (avg. YTM 7.5%), 2 lakhs in NPS (expecting 12% return) and 10 lakhs in Savings as emergency fund. I want to retire by 45 with monthly pension of 2 lakhs post tax increasing 7% annually. What should be my corpus amount and how should I invest per month in above instruments to reach it.
Ans: To retire at 45 with a monthly pension of 2 lakhs post-tax, increasing at 7% annually, you need to estimate your post-retirement expenses and calculate the corpus required to generate this income. Assuming a conservative withdrawal rate of 4% annually to sustain the pension without depleting the corpus, you'll need a corpus of approximately 6 crores at the time of retirement.

Here's how you can plan your investments to reach this goal:

Equities: Since you have a long investment horizon and a higher risk tolerance, allocate a significant portion of your investments to equities. Continue investing in stocks and mutual funds with an expected return of 12-15% annually. Increase your SIP in mutual funds to expedite wealth accumulation.
Fixed Income: Maintain a balanced portfolio by diversifying into fixed-income instruments like PF, PPF, govt. bonds, and NPS. Although these instruments offer lower returns, they provide stability and reduce overall portfolio risk. Maximize contributions to NPS, which offers tax benefits and potentially higher returns.
Emergency Fund: Keep your emergency fund intact to cover unexpected expenses and avoid liquidating long-term investments prematurely.
Regular Review: Periodically review your investment portfolio and make adjustments based on changing financial goals, market conditions, and risk appetite. Consider consulting with a financial advisor or planner to optimize your investment strategy and ensure alignment with your retirement objectives.
By consistently investing in a diversified portfolio of equities and fixed-income instruments, you can work towards building a sufficient corpus to achieve your retirement goals. Remember to stay disciplined, stay invested for the long term, and periodically reassess your financial plan to stay on track.

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

Asked by Anonymous - Apr 17, 2024Hindi
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RamalingamJi, I am 51 years old & having approx. corpus of Rs. 30L. I want to have 1.5L/month after retirement (at the age of 58 yrs.) so how much should I save from now so that I can have this much money w/o trouble. At present I am investing 20K/month in MF, 12.5K/month in PPF, 30K/month in EPF, 12K in Sukanya Smridhi, 17k/month in NPS, 6k/month in another PPF & another 20K/month in other saving schemes making it total 117.5K/month.
Ans: Planning for your Retirement Income
You're taking a great step by planning for your retirement income at 51. Here's how we can estimate how much you might need to save to reach your goal of Rs. 1.5 lakh per month after retirement at 58.

Factors to Consider:

Current Savings: Your current monthly savings of Rs. 1,17,500 is a significant starting point.
Time Horizon: You have 7 years (58 - 51) till retirement.
Desired Retirement Income: Your target monthly income is Rs. 1,50,000.
Inflation: Inflation erodes the purchasing power of money over time. Consider a conservative estimate of 5-7% inflation.
Rate of Return: The expected return on your investments will determine how much you need to save.
Here's a simplified calculation (assuming a fixed rate of return):

Total Corpus Required:

Let's assume an 8% annual return and 7% inflation (adjusted return of 1%).
We can use the formula for perpetuity present value (PV) to calculate the corpus needed: PV = Desired monthly income (adjusted for inflation) / Adjusted annual return PV = (Rs. 1,50,000 * 12) / (1 + 0.01) = Rs. 1,80,00,000
Shortfall in Corpus:

You already have Rs. 30 lakh corpus.
The shortfall would be Rs. 1,80,00,000 - Rs. 30,00,000 = Rs. 1,50,00,000
Additional Monthly Savings:

To calculate the additional monthly savings required, we can use a savings goal calculator available online.
These factors will be considered: time horizon, desired corpus, and expected return.
Important Points to Remember:

This is a simplified calculation. Real-world returns may fluctuate.
Consider consulting a financial advisor for a personalized plan considering your risk tolerance and investment portfolio.
You've mentioned various investments (MF, PPF, EPF, etc.). An advisor can help assess the asset allocation and suggest adjustments if needed.
Positive Aspects of your Current Savings:

Your current savings of Rs. 1,17,500 per month is commendable.
You're invested in a variety of instruments (equity, debt, government schemes).
Next Steps:

Estimate Shortfall: Use a retirement calculator to get a more accurate estimate of the additional monthly savings required.
Review Investments: Consult a financial advisor to assess your current asset allocation and suggest adjustments if necessary to align with your retirement goals.
Increase Savings: If there's a shortfall, consider ways to increase your monthly savings by reviewing expenses or increasing income.
By planning and potentially making some adjustments, you can be well on your way to achieving your desired retirement income.

..Read more

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Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 21, 2024

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I am 53 years old working woman having SIP of 50000 per month. My retirement age is 60 years. My total corpus is 1 crore 30 lacs. How much I should save to have a corpus of around 2.25 crores at my retirement?
Ans: Assessing Your Current Financial Situation
You have done an admirable job, accumulating a corpus of ?1.30 crores and saving ?50,000 per month through SIPs. At 53 years old, you are well on your way to securing a comfortable retirement by 60.

Setting a Retirement Goal
Your goal is to have a corpus of ?2.25 crores by the time you retire at 60. To achieve this, you need to evaluate your current savings strategy and make necessary adjustments.

Calculating the Required Savings
Your existing corpus and ongoing SIPs are already substantial. However, to bridge the gap and reach ?2.25 crores, you may need to increase your monthly savings or invest in higher-yielding instruments.

Benefits of Actively Managed Funds
Consider investing in actively managed funds. These funds have professional managers who actively make investment decisions to outperform the market. This approach can potentially yield higher returns compared to index funds, which merely track the market.

Evaluating Your SIP Strategy
Your current SIPs of ?50,000 per month are a great way to build wealth systematically. Review the performance of these SIPs periodically. Ensure they are aligned with your financial goals and risk tolerance. Adjusting your SIP amount upward, if feasible, can help you reach your target faster.

Diversifying Your Investments
Diversification reduces risk and enhances potential returns. Ensure your portfolio includes a balanced mix of equity and debt funds. Equity funds offer growth, while debt funds provide stability.

Importance of Regular Reviews
Regularly reviewing your investment portfolio is essential. Financial markets and personal circumstances change over time. Annual reviews with a Certified Financial Planner can help you stay on track towards your retirement goal.

Risk Management
Assess your risk tolerance. As you approach retirement, consider gradually shifting from high-risk investments to more stable ones. This strategy protects your corpus from market volatility as you near your retirement age.

Professional Guidance
A Certified Financial Planner can provide personalized advice tailored to your situation. They can help optimize your investment strategy, ensuring it aligns with your retirement goals. Their expertise ensures your financial plan is robust and adaptable to changes.

Inflation Considerations
Inflation erodes purchasing power over time. Ensure your retirement corpus grows at a rate that outpaces inflation. Investing in growth-oriented funds can help counteract the effects of inflation.

Health and Emergency Funds
Maintain an emergency fund separate from your retirement savings. This fund should cover unexpected expenses and be easily accessible. Additionally, ensure you have adequate health insurance to cover medical costs during retirement.

Appreciating Your Progress
Your dedication to saving and planning for retirement is commendable. By staying disciplined and proactive, you are well on your way to achieving your retirement goals. Continue your efforts with confidence and regular guidance from a Certified Financial Planner.

Conclusion
To achieve a retirement corpus of ?2.25 crores by age 60, consider increasing your SIPs, diversifying your investments, and regularly reviewing your portfolio. With professional guidance and careful planning, you can secure a comfortable and fulfilling retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Asked by Anonymous - Jun 17, 2024Hindi
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Sir, I am 38 years old and married and currently have no children or loan. I get a monthly income of Rs 75000/- out if which Rs 30000/-goes into monthly mutual fund sips. My monthly expenses are Rs 30000/-. I also transfer excess cash in an emergency fund when possible. I Invest Rs 50000/- each per year in NPS and PPF respectively and i have a mediclaim cover of Rs 10 Lakhs.I have 20 more years untill retirement. I would like to build a retirement corpus of Rs 2 crores. Kindly guide me as to how to go about it. Also is it recommended to open fixed deposits and if so then about how much worth should i open the same?
Ans: Your current financial strategy shows strong discipline and foresight. You are well on your way to building a substantial retirement corpus. Let's delve deeper into your financial situation and provide a comprehensive guide to ensure you achieve your retirement goal of Rs 2 crores in 20 years.

Current Financial Overview
Income and Expenses
Monthly Income: Rs 75,000
Monthly SIP Investment: Rs 30,000
Monthly Expenses: Rs 30,000
Surplus for Emergency Fund: Rs 15,000 (when available)
Annual NPS Contribution: Rs 50,000
Annual PPF Contribution: Rs 50,000
Existing Coverage and Investments
Mediclaim Cover: Rs 10 Lakhs
Emergency Fund: Accumulated over time
Time Until Retirement: 20 years
Assessing and Optimizing Your Strategy
Mutual Fund SIPs
Investing Rs 30,000 per month in mutual fund SIPs is commendable. This disciplined approach will benefit from rupee cost averaging and compound growth over time.

Advantages of SIPs:

Regular Investment: Ensures consistent contributions irrespective of market conditions.
Rupee Cost Averaging: Buys more units when prices are low and fewer when prices are high, averaging the cost.
Compounding: Returns reinvested grow exponentially over time.
Recommendation: Continue your current SIPs. Periodically review the performance and diversify across equity, debt, and hybrid funds to balance risk and returns.

National Pension System (NPS)
The NPS is a good choice for long-term retirement planning. Your annual contribution of Rs 50,000 benefits from tax deductions under Section 80C and 80CCD.

Advantages of NPS:

Tax Benefits: Reduces taxable income, providing immediate tax savings.
Retirement Corpus: Builds a substantial corpus with market-linked growth.
Annuity Option: Ensures a regular pension post-retirement.
Recommendation: Continue your NPS contributions. Consider increasing the amount gradually to maximize the retirement corpus and tax benefits.

Public Provident Fund (PPF)
PPF is a safe, long-term investment with assured returns and tax benefits. Your annual contribution of Rs 50,000 to PPF is a prudent choice.

Advantages of PPF:

Safety: Government-backed, providing guaranteed returns.
Tax Benefits: Contributions and interest earned are tax-free under Section 80C.
Long-Term Growth: Suitable for retirement planning due to the 15-year lock-in period.
Recommendation: Continue your annual PPF contributions. It ensures a risk-free portion of your retirement corpus.

Emergency Fund
Having an emergency fund is essential for financial stability. It should cover at least six months of living expenses to manage unforeseen events without liquidating investments.

Recommendation: Maintain and gradually increase your emergency fund to the desired level. Allocate the Rs 15,000 monthly surplus when possible to build this fund.

Building a Rs 2 Crore Retirement Corpus
Calculating the Required Monthly Investment
To build a retirement corpus of Rs 2 crores in 20 years, let's assume an average annual return of 10% from your diversified portfolio (a mix of equity and debt).

Steps to Achieve the Goal:

Evaluate Current Contributions: Calculate the future value of your existing SIPs, NPS, and PPF contributions.
Adjust Investments: Determine if additional monthly investments are needed to meet the target.
Review and Rebalance: Periodically review and adjust the portfolio to stay on track.
Example:

Current SIPs: Rs 30,000/month
NPS Contribution: Rs 50,000/year
PPF Contribution: Rs 50,000/year
Assuming a 10% annual return, calculate the future value of these investments over 20 years.

Importance of Diversification
Equity Mutual Funds
Equity mutual funds offer high growth potential but come with higher risk. Diversifying across large-cap, mid-cap, and small-cap funds can balance the risk.

Recommendation: Allocate a portion of your SIPs to equity mutual funds. Diversify across different types to capture growth while managing risk.

Debt Mutual Funds
Debt mutual funds provide stability and lower risk compared to equity funds. They are ideal for balancing the overall portfolio.

Recommendation: Include debt mutual funds in your SIP portfolio. They offer stable returns and act as a cushion during market volatility.

Balanced or Hybrid Funds
Balanced or hybrid funds invest in a mix of equity and debt instruments, providing growth potential with reduced risk.

Recommendation: Consider balanced funds to maintain a diversified portfolio with a balanced risk-return profile.

Fixed Deposits: A Conservative Approach
Fixed deposits (FDs) offer guaranteed returns and safety but generally lower returns compared to mutual funds. They are suitable for short-term goals and as part of an emergency fund.

Advantages of FDs:

Safety: Principal is secure with assured returns.
Liquidity: Can be easily liquidated if needed.
Predictable Returns: Ideal for short-term financial goals.
Recommendation: Allocate a portion of your emergency fund or short-term savings to FDs. Avoid over-reliance on FDs for long-term growth due to lower returns.

Tax Efficiency
Tax-Saving Instruments
Investing in tax-saving instruments like ELSS (Equity Linked Savings Scheme) can optimize tax benefits and contribute to wealth creation.

Advantages of ELSS:

Tax Deductions: Eligible for deductions under Section 80C.
Short Lock-In Period: Only a three-year lock-in compared to PPF.
Growth Potential: Equity exposure provides high growth potential.
Recommendation: Consider ELSS for tax-saving purposes and long-term growth. It complements your existing tax-saving strategies.

Monitoring and Rebalancing
Regularly monitoring and rebalancing your portfolio ensures it aligns with your financial goals and risk tolerance. Market conditions change, and so do your financial needs.

Recommendation: Review your portfolio at least annually. Rebalance if necessary to maintain the desired asset allocation and optimize returns.

Final Insights
Your current financial strategy is robust and well-structured. Investing Rs 30,000 monthly in SIPs, Rs 50,000 annually in NPS, and Rs 50,000 annually in PPF reflects a disciplined approach. To build a retirement corpus of Rs 2 crores in 20 years, consider the following steps:

Continue Current Investments: Maintain your SIPs, NPS, and PPF contributions. They form a solid foundation for your retirement corpus.
Diversify Portfolio: Include equity, debt, and balanced funds in your SIPs to balance risk and maximize returns.
Build Emergency Fund: Ensure your emergency fund covers at least six months of living expenses. Allocate the monthly surplus towards this fund.
Consider Tax-Saving Instruments: ELSS can provide additional tax benefits and growth potential.
Monitor and Rebalance: Regularly review and adjust your portfolio to stay aligned with your goals.
Fixed deposits can be part of your emergency fund or short-term savings but avoid relying heavily on them for long-term growth. By following these recommendations, you are on the right path to achieving your retirement goal of Rs 2 crores.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..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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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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