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45-Year-Old Seeking Advice: How Much More to Save for Comfortable Retirement in India?

Ramalingam

Ramalingam Kalirajan  |8027 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 01, 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 - Aug 01, 2024Hindi
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I am 45 Years Old and living with my wife and 11 yrs daughter in USA and want live in my small home hometown in India. I have 32 lakhs in PPF, 25 lakhs PF & 2 Apartment in Bangalore, investing 5 thousands per months in SIP & 2 Lakhs per year in retirement plan. I am planning to retire at 60 Yrs of age, how much more i should save for retirement for a better life post retirement.

Ans: Understand Your Current Financial Position
You are 45 years old, married, staying in the USA with your wife and 11-year-old daughter. You are planning to retire at the age of 60 years and relocate to your hometown in India.

Your current assets are as follows:

Rs 32 lakhs in PPF
Rs 25 lakhs in PF
2 apartments in Bangalore
Rs 5,000 per month in SIPs
Rs 2 lakhs per year in a retirement plan
Evaluating Your Retirement Needs
Age at Retirement:

You want to retire at 60 years.
Monthly Expenses:

Estimate your monthly expenses in India post-retirement.
Consider living expenses, medical costs, travel, and leisure.
Inflation Adjustment:

Consider inflation for maintaining your life standard.
Estimating Retirement Corpus
Current Savings:

Total PPF: Rs 32 lakhs
Total PF: Rs 25 lakhs
SIPs and Retirement Plan: Appreciating over the years
Target Retirement Corpus:

How much you would need to live comfortably?
A general rule of thumb is 25-30 times your annual expenses.
Example Calculation:

If your projected monthly expenses are Rs 50,000,
Annual expenses: Rs 6 lakhs
Desired corpus: Rs 1.5 to Rs 1.8 crores
Increase Your Savings
Step-up SIP Investments:
Currently, you invest Rs 5,000 a month.
Gradually increase this to Rs 15,000 a month.
Increase Investments in Retirement Plan:
Currently, you are investing Rs 2 lakhs a year.
Gradually increase this to Rs 3 lakhs a year.
Diversify Your Investments
Mutual Funds:
Continue with SIPs in diversified mutual funds.
Integrate equity and debt funds.
Fixed Deposits:

Only a small portion to be invested in fixed deposits for stability.
Be ensured of liquidity for emergencies.
PPF and PF:

Continue investing in PPF and PF.
Their returns are safe and tax-efficient.
Monitoring and Reviewing
Regular Review:

Get a review of all your investments once a year.
Based on their performance and your goals, adjust your contribution.
Adjust for Inflation:

The return on your investments should at least beat inflation.
Equities have given much higher returns.
Health Insurance:

Always maintain comprehensive health insurance.
Cover for any possible medical expenses in your retirement years.
Final Thoughts
You have a good start with PPF, PF, and mutual funds. Now, step up your SIPs and retirement plan contributions. Diversify the investments and periodically review the portfolio. Planning and disciplined saving will take you to the retirement goal.

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

Ramalingam Kalirajan  |8027 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 15, 2024

Asked by Anonymous - Apr 15, 2024Hindi
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Hi, I am 25 years old working in a MNC. Earning arround 65k excluding taxes in Bangalore + some shift, yearly bonus etc. avg hike 20%(not every year only hike 15% promotion 25% like that). I also earn 40-50k as part time few months not every month. My living cost is arround 20-25k per month I have to give my family arround 20k per month needs full fill I use arround 30k per year like phone laptop electronic (increase 20% yearly). How much should I save to retire at the age of 45? I am not married. Have arround 12L+ in savings 70% equity and 30% debt. I plan to buy a car in 2 year and marriage, also family planning.
Ans: Here's a breakdown to help you estimate how much you can save towards retirement at 45, considering your current situation and future plans:

Income:

Monthly Salary (excluding taxes): ?65,000 (approx.)
Yearly Bonus (average): Let's assume a conservative estimate of 1 month's salary (?65,000)
Part-time Income (average monthly): ?45,000 (considering the range)
Total Average Monthly Income:

(?65,000 + ?45,000)/12 + ?65,000/12 ≈ ?91,667

Expenses:

Living Costs: ?25,000
Family Support: ?20,000
Electronics (Yearly): ?30,000/12 = ?2,500 (monthly)
Total Average Monthly Expenses: ?47,500

Savings Potential:

?91,667 (Monthly Income) - ?47,500 (Monthly Expenses) ≈ ?44,167

Important Considerations:

Future Expenses: You plan to buy a car in 2 years, get married, and potentially start a family. These will significantly impact your savings. Factor in estimated costs for these events.
Inflation: Inflation will erode the purchasing power of your savings over time. Consider an inflation rate of 5-6% while calculating your retirement corpus.
Here's a suggestive approach:

Emergency Fund: Aim for 3-6 months of living expenses as an emergency fund. With your current expenses, this could be ?1.42 lakh to ?2.84 lakh.
Retirement Savings: Focus on maximizing retirement savings after building your emergency fund. You have a 15-year horizon (45 - 25 = 20 years, minus 5 years for planning major expenses). Investment advisors generally recommend saving 15-20% of your income for retirement. With your potential savings of around ?44,167, consider allocating a significant portion (around ?6,600 to ?8,800 monthly) towards retirement funds. You can adjust this based on your risk tolerance and future financial goals.
Investment Strategy: Since you have a long investment horizon, you can consider an equity-heavy approach for your retirement savings (70-80% equity). However, as you approach retirement, gradually shift towards a more balanced allocation with debt instruments to reduce volatility.
Retirement Corpus Estimation (using a simplified formula):

Corpus = (Retirement Age - Current Age) * Annual Expenses * Inflation Adjusted Factor

Assumptions:

Retirement Age: 45
Current Age: 25
Annual Expenses (adjusted for inflation at 5% for 20 years): Let's assume your expenses grow at the same rate as inflation, leading to an annual expense of ?3.78 lakh at retirement (?25,000 * 1.05 ^ 20)
Inflation Adjusted Factor (assuming a withdrawal rate of 4% and investment return slightly exceeding inflation): 25
Estimated Corpus: ?3.78 lakh/year * 25 ≈ ?9.45 crore

Note: This is a simplified estimation and doesn't account for future income growth, investment returns,

Recommendations:

Create a Budget: Track your income and expenses to identify areas for saving.
Automate Savings: Set up SIP (Systematic Investment Plan) for mutual funds to automate your retirement savings.
Seek Professional Advice: Consider consulting a Certified Financial Planner (CFP) for personalized financial planning based on your specific goals and risk tolerance. A CFP can help you create a comprehensive retirement plan considering your future expenses, investment strategy, and overall financial situation.
CFPs are financial advisors who have rigorous training and experience in financial planning. They are held to a high ethical standard and are required to act in their clients' best interests. Consulting a CFP can ensure you receive sound financial advice tailored to your unique needs and aspirations.

By being proactive with your savings and investments, you can work towards achieving your retirement goals at 45. Remember, this is a journey, and you might need to adjust your plan as your life progresses.

..Read more

Ramalingam

Ramalingam Kalirajan  |8027 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 18, 2025

Asked by Anonymous - Feb 16, 2025Hindi
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Hello sir, I am 44 year old and like to retire by age 55. I am having 12 year old son, my wife is house wife. I am having one home that I made two year back having cost 60lac, 24 lac in ppf, 12lac in gold, 14 lac in property, 40000 monthly sip, 5 lac in equity, 2.4 lac nps. My monthly expenses are 40k. Kindly let me know how much more should I save for 56 year of retirement that fulfill my needs.
Ans: Your question requires a detailed financial assessment based on your assets, expenses, and retirement timeline. Let’s break it down step by step.

Current Financial Position
Age: 44 years

Retirement Goal: 55 years (11 years left to save)

Monthly Expenses: Rs 40,000

Existing Assets:

Home: Rs 60 lakh (Not considered for investment)
PPF: Rs 24 lakh
Gold: Rs 12 lakh
Property: Rs 14 lakh
SIP: Rs 40,000 per month
Equity: Rs 5 lakh
NPS: Rs 2.4 lakh
Total Investable Assets: Around Rs 57.4 lakh (Excluding home)

Retirement Corpus Needed at 55
Monthly expenses of Rs 40,000 today will increase due to inflation.

At a 6% inflation rate, your monthly expense at 55 years will be around Rs 75,000.

You need a corpus that can generate Rs 75,000 monthly for at least 30 years.

This requires Rs 3.5 crore to Rs 4 crore (approximate estimate).

How Much More to Save?
Current Investments: Around Rs 57.4 lakh (excluding home).

Future Value of Current Investments at 55 (Assuming moderate returns): Around Rs 2 crore.

Shortfall: You need at least Rs 1.5 crore to Rs 2 crore more in the next 11 years.

You must increase savings and optimise investment returns.

Investment Strategy to Reach the Goal
1. Increase Your SIP Investments
Your Rs 40,000 monthly SIP is good but needs to increase gradually.

Increase SIP by 10% every year to reach the target corpus.

Use actively managed funds for higher growth potential.

2. Maximise NPS Contributions
Your NPS corpus is low (Rs 2.4 lakh).

Increase NPS contributions to get tax benefits and retirement security.

Allocate more to equity within NPS for better growth.

3. Use PPF Wisely
PPF will mature at 15 years but can be extended in blocks of 5 years.

Let it grow for tax-free returns till you retire.

Avoid withdrawing unless necessary.

4. Optimise Gold & Property Investments
Gold does not generate passive income.

Consider gradually shifting gold holdings into mutual funds or NPS.

If your property is not generating income, consider selling or renting it out.

5. Emergency & Health Planning
Keep at least Rs 10 lakh as an emergency fund in fixed deposits or liquid funds.

Ensure you have adequate health insurance for the family.

Final Insights
Your goal of retiring at 55 is possible with better financial planning.

Increase SIPs, boost NPS contributions, and reallocate gold/property for better returns.

Target a corpus of Rs 4 crore to ensure financial security post-retirement.



Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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Ans: Dear Anonymous,
I understand your concerns but it might be nice if you understand her concerns as well. While most people promise to neither judge nor share sensitive details, they rarely keep their promise, especially when the experiences are coming from a woman. Her reluctance about sharing her past with you might be stemming from the same.
To be honest, the past should not matter as much as the present but since it is important to you, I would recommend you open up about it directly to her, expressing how her not opening up is stopping you from trusting her completely. If she still does not want to talk about it, I don't see any scenario where it would be the right choice to push her about it again. You have only met her and things are yet to be official. In that case, you should rethink this alliance. Secrecy might be important to her as much as knowing every detail is important to you. Neither is wrong here. Do not rush into any conclusion and speak to her first. Meet up exclusively for this discussion and see where things go from there.
Hope this helps

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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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