Can I Afford a Comfortable Retirement with My Current Investments?

Ans: At 45, you have a good foundation for retirement, and I appreciate your foresight. Your investments in property, gold, and SIPs show a diversified approach, and you're managing your children’s education while working toward a stable future. With your current income and expenses, you’re focused on your family's needs, but there’s room to ensure your retirement is stress-free and secure.

Let’s break this down into specific areas to address your retirement concerns and how to optimise your current investments for a successful future.

Property Investment Analysis
1. Property Portfolio:

You hold six plots with a current value of Rs 2.16 crore.
These plots were purchased at a significantly lower cost 8 years ago, reflecting good capital appreciation.
However, property is a non-liquid asset, meaning you can’t sell it easily for cash when needed.
It also doesn’t generate any regular income unless rented or sold.
For retirement planning, it’s crucial to focus on investments that generate regular income, like mutual funds or other financial assets. Property can be a good long-term asset, but for a smooth retirement, liquid investments are preferable.

Gold Investment Evaluation
2. Gold as an Asset:

You own 1500 grams of gold, which is a significant investment.
Gold typically acts as a hedge against inflation and has the advantage of being liquid.
However, gold prices can fluctuate, and it doesn’t generate any regular income.
Since gold doesn’t pay interest or dividends, it shouldn’t be the core of your retirement strategy.
Gold can provide financial security during emergencies but shouldn’t be your primary focus for retirement income. You may consider selling a portion closer to retirement and reinvesting in more growth-oriented assets.

Systematic Investment Plan (SIP)
3. SIPs for Long-Term Wealth:

You’re currently investing Rs 25,000 monthly in SIPs with a current value of Rs 6 lakhs.
Continuing this SIP for the next 15 years can provide significant wealth accumulation.
SIPs are an ideal way to invest regularly in equity mutual funds, which can offer higher returns over a long horizon.
With proper fund selection through a Certified Financial Planner, actively managed equity funds can help you achieve superior growth over passive options like index funds.
However, since your SIP is the primary financial investment for retirement, consider increasing it when your financial situation allows, such as after your car loan is repaid.

Insurance Assessment
4. Insurance Maturity and Term Plan:

You have insurance policies with a maturity value of Rs 40 lakh and a term plan with Rs 50 lakh coverage.
Term insurance is essential for protecting your family in case of unforeseen events.
However, investment-cum-insurance plans (traditional policies) often have low returns.
You may consider reviewing or surrendering traditional insurance policies and reinvesting the maturity proceeds in mutual funds for better growth.
Insurance should primarily serve as a risk cover, and your term plan already offers sufficient protection.

Car Loan Consideration
5. Car Loan EMI:

You currently have a car loan with an EMI of Rs 15,000 for the next three years.
Once the loan is paid off, you’ll have an additional Rs 15,000 per month that can be directed toward savings or investments.
Consider using this freed-up cash flow to increase your SIPs or set up an emergency fund.
This can greatly contribute to building a more secure retirement.

Children’s Education and Future Expenses
6. School Fees:

You’re currently paying Rs 3 lakh annually for your children’s education.
This is a significant expense, but it’s also temporary.
As your children grow older, education expenses will reduce, allowing you to allocate more toward your retirement savings.
Start planning for any future expenses like higher education, but after school fees, your savings capacity will improve.

Retirement Planning Insights
7. Retirement Savings Need:

At 45, you have 15 years left to build a comfortable retirement corpus.
Based on your current investments, you will need to focus more on financial assets that generate regular income post-retirement.
Your SIPs are great for long-term growth, but you may need additional investments to ensure adequate retirement income.
It’s important to calculate the required retirement corpus by estimating your post-retirement expenses. A Certified Financial Planner can help you set realistic goals and optimise your portfolio.

Finalising Your Retirement Plan
8. Liquidating Property Closer to Retirement:

Since your property is non-liquid, consider selling one or more plots closer to retirement.
The proceeds can be invested in mutual funds or other financial instruments to generate regular income.
This will give you the liquidity and regular income needed for retirement.
Liquid investments ensure you don’t face cash flow issues after retiring.

Increasing SIP Contributions Post-Loans
9. Freeing Up Cash Flow After Loan Repayment:

Once your car loan is paid off in three years, you will have an additional Rs 15,000 per month.
Direct this toward increasing your SIP contributions or setting up a more robust emergency fund.
Increasing your SIP contributions will enhance your retirement corpus, helping you achieve your financial goals.
Every increase in SIP boosts your overall long-term returns.

Gold as a Backup
10. Gold for Emergencies:

Gold can be your backup plan during financial emergencies or when unexpected expenses arise.
It’s a liquid asset and can be sold easily if needed.
However, for long-term retirement planning, focus more on investments that provide growth and income rather than holding too much in gold.
Selling a portion of your gold and investing it in growth assets closer to retirement can provide better financial security.

Final Insights
You’re on the right track with your current investments, but to ensure a smooth retirement after 60, some adjustments are needed. Your SIPs are a great long-term growth strategy, but once your loans are cleared, focus on increasing your SIP contributions. Consider selling some of your property for more liquid investments closer to retirement.

It’s also essential to review your insurance policies, especially traditional ones, and reinvest in better growth options like mutual funds. Gold can serve as a backup, but it shouldn’t be the core of your retirement plan. Keep an eye on your children’s education expenses, and after they reduce, use the extra cash flow to boost your retirement savings.

By making these changes and working with a Certified Financial Planner, you can secure a comfortable and successful retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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