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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 07, 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 - Apr 24, 2024Hindi
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Hi I am 47 years old. Married but no kids . Me and my wife combined annual income is 70 lacs . We have our own house in gurgaon whose current value is aprox 6 cr . We dont have any kind of loan on us . Currently our savings are as follows 1.65 cr invested in lic jeevan shanti and jeevan akshay from which Currently we are earning 8 lacs / year and by 2028 it will increase to 14 lacs / year till whole life . We have invested in hdfc sanchay plus also , from their we will get 16 lacs / anum starting from 2029 till next 25 years . Joint Ppf corpus is currently 80 lacs , will continue to invest 3 lacs / year for next 15 years My wifes epf vpf current corpus is aprox 20 lacs , currently she is contributing 2.5 lacs / year in that and will continue to do so till next 10 years Emergency fund of 20 lacs in form of auto sweep fd in saving account Equity investment currently Nps tier 2 ( 100 % equity - 55lacs ) Miare asset small cap etf - 5 lacs Nippon nifty bees etf - 5 lacs Planning to invest 30 lacs / year for next 5- 7 years in above equity options . Our current yearly expenses are neary 18 / 20 lacs We have medical insurance cover of 30 lacs And a term insurance of 1.5 cr and 1 cr respectively Pls suggest that are we on right track for a comfortable retirement at around 55 years Considering life expectency of 80 years and inflation. What should be our SWP and from which investments ( as mentioned above ) and how much this withdrawal can be increased per year to adjust the inflation and maintain our current lifestyle. Also i would like to know that whether shifting all the corpus from tier 2 to tier 1 at the age of 59 will be a wise decision in my case as 60 % withdrawal at age 60 from tier 1 will be tax free which can be withdrawn thru swp . Balance 40 corpus amount will generate annuity which only will be taxable.

Ans: It's evident that you've made significant strides towards securing a comfortable retirement, but let's delve deeper into your current financial position and future plans:
• Income and Assets: With a combined annual income of 70 lakhs and significant assets, including your house in Gurgaon and various investments, you're well-positioned for retirement.
• Investment Portfolio: Your investment portfolio appears diversified, with allocations to LIC policies, HDFC Sanchay Plus, PPF, EPF/VPF, equity investments, and plans for further equity investments.
• Retirement Planning: Based on your current savings, income, and investments, along with your planned contributions and expected returns, it seems you're on track for a comfortable retirement.
• SWP and Inflation Adjustments: To determine your SWP (Systematic Withdrawal Plan), consider factors such as your estimated lifespan, expected returns on investments, inflation rate, and desired annual income. Adjust your withdrawals annually to account for inflation and ensure your lifestyle is maintained.
• NPS Tier 2 to Tier 1 Transfer: Shifting your corpus from NPS Tier 2 to Tier 1 at age 59 could be beneficial, considering the tax benefits associated with withdrawals from Tier 1 after age 60. Assess the tax implications and consult with a financial advisor to make an informed decision.
• Insurance and Emergency Fund: Your medical insurance cover and term insurance policies provide essential protection. Ensure these coverages are periodically reviewed and adjusted as needed.
• Consult a Financial Advisor: Given the complexity of retirement planning and tax implications, consider consulting a Certified Financial Planner to optimize your retirement strategy, tax planning, and SWP calculations.
Overall, it appears that you've taken proactive steps towards a secure retirement. With careful monitoring, periodic adjustments, and professional guidance, you can continue on the path to achieving your retirement goals and maintaining your desired lifestyle.
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 18, 2024

Asked by Anonymous - Apr 23, 2024Hindi
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Money
Hi I am 47 years old. Married but no kids . Me and my wife combined annual income is 70 lacs . We have our own house in gurgaon whose current value is aprox 6 cr . We dont have any kind of loan on us . Currently our savings are as follows 1.65 cr invested in lic jeevan shanti and jeevan akshay from which Currently we are earning 8 lacs / year and by 2028 it will increase to 14 lacs / year till whole life . We have invested in hdfc sanchay plus also , from their we will get 16 lacs / anum starting from 2029 till next 25 years . Joint Ppf corpus is currently 80 lacs , will continue to invest 3 lacs / year for next 15 years My wifes epf vpf current corpus is aprox 20 lacs , currently she is contributing 2.5 lacs / year in that and will continue to do so till next 10 years Emergency fund of 20 lacs in form of auto sweep fd in saving account Equity investment currently Nps tier 2 ( 100 % equity - 55lacs ) Miare asset small cap etf - 5 lacs Nippon nifty bees etf - 5 lacs Planning to invest 30 lacs / year for next 5- 7 years in above equity options . Our current yearly expenses are neary 18 / 20 lacs We have medical insurance cover of 30 lacs And a term insurance of 1.5 cr and 1 cr respectively Pls suggest that are we on right track for a comfortable retirement at around 55 years Considering life expectency of 80 years and inflation. What should be our SWP and from which investments ( as mentioned above ) and how much this withdrawal can be increased per year to adjust the inflation and maintain our current lifestyle. Also i would like to know that whether shifting all the corpus from tier 2 to tier 1 at the age of 59 will be a wise decision in my case as 60 % withdrawal at age 60 from tier 1 will be tax free which can be withdrawn thru swp . Balance 40 corpus amount will generate annuity which only will be taxable.
Ans: Comprehensive Retirement Planning Assessment

Analyzing Retirement Preparedness and Strategy

Your meticulous approach towards retirement planning is evident, with a diversified portfolio and a clear vision for the future. Let's delve into each aspect to ensure a comfortable retirement at around 55 years, considering life expectancy and inflation.

Assessing Current Financial Position

Your combined annual income of 70 lakhs, along with substantial investments and assets, positions you well for retirement. The absence of loans and a sizable emergency fund further strengthens your financial resilience.

Evaluating Investment Portfolio

Your investment portfolio comprises a mix of traditional and market-linked instruments, providing a balance between stability and growth potential. Additionally, your equity investments and continued contributions to PPF demonstrate a long-term wealth accumulation strategy.

Benefits of Regular Funds Investing through MFD with CFP Credential

Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential offers personalized guidance and comprehensive financial planning. An MFD can assist in optimizing your investment strategy and ensuring alignment with your retirement goals.

Disadvantages of Direct Funds

Direct funds require investors to conduct their own research and make investment decisions independently, which may not be suitable for all investors. Utilizing the expertise of an MFD with a CFP credential can help navigate market complexities and optimize returns.

SWP Strategy for Retirement Income

To ensure a comfortable retirement, calculate your desired annual expenses adjusted for inflation and determine the Sustainable Withdrawal Rate (SWR) from your investment corpus. Regularly review your portfolio performance and adjust SWP amounts accordingly.

Mitigating Tax Implications on Tier 1 Withdrawals

Shifting corpus from NPS Tier 2 to Tier 1 at age 59 can be a prudent decision, considering the tax benefits associated with Tier 1 withdrawals. Withdrawals up to 60% at age 60 are tax-free, while the remaining amount can generate taxable annuities.

Planning for Future Expenses and Contingencies

Anticipate future expenses such as healthcare costs and lifestyle enhancements in retirement planning. Ensure adequate medical insurance coverage and periodically reassess your insurance needs to mitigate unforeseen risks.

Conclusion

Your comprehensive retirement planning approach, coupled with disciplined savings and investments, positions you well for a comfortable retirement at around 55 years. Continuously monitor your portfolio performance, reassess your financial goals, and seek guidance from a Certified Financial Planner (CFP) to navigate evolving financial landscapes effectively.

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 15, 2024

Money
Dear Mr.Arora I am 43yrs old with one son at 8. Wife is working with 13LPA ( may work only for next 5 yrs). We are in Hyderabad. Myself employed with 25LPA. We both have term Insurance of 2 & 1Cr resp. I have one flat of 0.7Cr and recently procured 1.5Cr flat and small piece of lant in village. Paying Ulip-SIP last 5yrs for 25Kpm & still to pay for 10yrs. My total passive income is 30Kpm. House Exp 70K & EMI 60Kpm. Family tour 0.5L/Yr . Presently i have 5L on MF/Equity & FD is 25L. I want to invest 50L each in MF & Shares , boost FD from 25 to 100L in next 12-15 yrs & 1Kg GOLD ( No fixed time period), Emergency liquid cash of 15-20L at the time of retirement. I m planning financial retirement at 55. Pls suggest your opinion to adopt best possible way of saving & investment. Thank you
Ans: Dear Mr. Arora,

Thank you for sharing the details of your financial situation. Your current setup reflects a solid foundation with both you and your wife earning well, alongside having substantial assets and insurance coverage. Your long-term goals and aspirations indicate a keen interest in securing a stable and prosperous future for your family. I understand the importance of making informed and strategic financial decisions, especially when planning for an early retirement. Let's dive into a detailed analysis and recommendations tailored to your needs.

Income and Expenses Analysis
Income:

Your combined annual income stands at Rs 38 LPA (Rs 25 LPA for you and Rs 13 LPA for your wife).

Passive income is Rs 30,000 per month.

Expenses:

Monthly household expenses are Rs 70,000.

EMI payments for the newly procured flat amount to Rs 60,000 per month.

Annual family tour expenses are Rs 50,000.

This analysis indicates a strong cash flow with significant income and manageable expenses. The goal is to optimize your investments and savings to meet your future goals.

Insurance and Protection
You have term insurance of Rs 2 crore for yourself and Rs 1 crore for your wife. This is a prudent measure ensuring financial protection for your family in case of any unforeseen events. It's crucial to review your coverage periodically to ensure it aligns with your current financial responsibilities and liabilities.

Asset Allocation
Current Assets:

Flat worth Rs 70 lakh.

New flat worth Rs 1.5 crore.

Small piece of land in the village.

Investments:

ULIP-SIP of Rs 25,000 per month, with 10 years remaining.

Mutual funds/equity investments of Rs 5 lakh.

Fixed deposits of Rs 25 lakh.

Passive income of Rs 30,000 per month.

You have a diversified asset base, including real estate, ULIPs, mutual funds, equity, and fixed deposits. However, for better returns and liquidity, focusing on mutual funds and equities over the long term can be more beneficial.

Goals and Objectives
Your financial goals include:

Investing Rs 50 lakh each in mutual funds and shares.

Increasing your fixed deposits from Rs 25 lakh to Rs 1 crore over the next 12-15 years.

Acquiring 1 kg of gold.

Maintaining emergency liquid cash of Rs 15-20 lakh at retirement.

Planning for financial retirement at 55.

Investment Strategies
Mutual Funds and Equities
Investing Rs 50 lakh each in mutual funds and equities is a sound strategy for wealth accumulation. Here are some recommendations:

Diversified Equity Funds: Actively managed funds can outperform index funds by leveraging market opportunities. Investing through a Certified Financial Planner (CFP) ensures professional management and alignment with your risk profile.

Blue-chip Stocks: Investing in shares of well-established companies with a history of stable returns and growth potential.

Sector Funds: Allocating a portion to sectors expected to grow, such as technology or healthcare, can yield higher returns.

Fixed Deposits
Increasing your fixed deposits to Rs 1 crore over the next 12-15 years ensures stability and security. Consider the following:

Laddering Strategy: Staggering your fixed deposit investments over different maturities to manage interest rate fluctuations and provide periodic liquidity.

High-Interest Accounts: Opt for banks or financial institutions offering higher interest rates for long-term deposits.

Gold Investment
Acquiring 1 kg of gold is a long-term goal. Gold can act as a hedge against inflation and currency fluctuations. You can achieve this through:

Systematic Investment Plan (SIP): Regularly investing small amounts in gold ETFs or sovereign gold bonds.

Physical Gold: Purchasing gold coins or bars periodically.

Emergency Fund
Maintaining an emergency fund of Rs 15-20 lakh at retirement is crucial. This fund should be easily accessible and kept in liquid instruments such as:

Savings Accounts: High-interest savings accounts offer liquidity and some returns.

Liquid Mutual Funds: These funds provide higher returns than savings accounts while maintaining liquidity.

ULIP and Insurance Policies
You mentioned paying ULIP-SIP for the last five years with ten years remaining. ULIPs often have higher charges and lower returns compared to mutual funds. Consider the following options:

Review ULIP Performance: Assess the performance and charges of your ULIP. If the returns are not satisfactory, it might be beneficial to surrender the policy and reinvest in mutual funds.

Term Insurance: Ensure your term insurance coverage is adequate and consider increasing it if needed. Avoid mixing insurance and investment; keep them separate for better returns and protection.

Retirement Planning
Planning for retirement at 55 requires a strategic approach to ensure financial independence and stability. Here are some key steps:

Retirement Corpus Calculation: Estimate the amount needed to sustain your lifestyle post-retirement. Consider factors like inflation, life expectancy, and medical expenses.

Regular Savings and Investments: Continue regular investments in mutual funds, equities, and fixed deposits. Increasing your SIP amounts periodically can help grow your retirement corpus.

Review and Rebalance Portfolio: Periodically review your investment portfolio with a CFP to ensure it aligns with your retirement goals and risk appetite.

Passive Income Enhancement
Your current passive income of Rs 30,000 per month is a great start. Enhancing passive income streams can provide additional security. Consider the following:

Dividend Yielding Stocks: Invest in companies with a history of paying consistent dividends.

Rental Income: If possible, rent out your properties for additional income.

Interest Income: Utilize interest from fixed deposits and bonds.

Comprehensive Financial Review
It's essential to conduct a comprehensive financial review periodically. This includes:

Assessing Goals: Ensure your financial goals remain relevant and adjust them as needed.

Tracking Progress: Monitor the performance of your investments and savings.

Adjusting Strategies: Make necessary adjustments to your investment strategies based on market conditions and personal circumstances.

Tax Planning
Effective tax planning is crucial to maximize your savings. Consider the following:

Tax-Saving Investments: Invest in tax-saving instruments under Section 80C, such as ELSS mutual funds, PPF, and NSC.

Health Insurance: Premiums paid for health insurance are eligible for deduction under Section 80D.

Tax Harvesting: Utilize tax harvesting strategies to minimize capital gains tax on your investments.


I commend your proactive approach to financial planning. You have a clear vision for your future and have already made significant strides in securing your family's financial well-being. Your disciplined savings and investments demonstrate a strong commitment to your goals.


Planning for early retirement and ensuring a comfortable lifestyle for your family is a significant undertaking. It's understandable to seek the best possible strategies to achieve these objectives. I appreciate the trust you place in seeking professional guidance.

Final Insights
Your financial journey is on a solid path, and with strategic planning and disciplined execution, you can achieve your goals. Regularly reviewing your financial plan with a Certified Financial Planner will ensure you stay on track and adapt to any changes in your circumstances. Focus on optimizing your investments in mutual funds and equities, enhancing your passive income streams, and maintaining a robust emergency fund. With a comprehensive approach, you can secure a prosperous future for yourself and your family.

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 27, 2024

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Hello sir, I am a 41 year old, have a dependend wife and 10 yr old daughter (5STD). I have a monthly income of 2.20 lakh in hand. Monthly expenses 70k. I have no debts and I am staying in my own flat. I invested 1 lakhs in equity stocks, 15 lakhs in MF lumpsum, 11 lakh in FD and 10 lakh in NSC. Till date my PF is 26 lacs. I pay 35,000 SIP monthly starting from 2023, pay PPF 1.5 lacs p.a.from 2022, pay NPS lacs p.a from 2022 and pay SSY 1.5 lacs p.a.from 2020 and PPF for wife 1 lacs p.a from 2022 and PPF for daughter 50k p.a.from 2023. Family medical insurance of 10 lacs.. and myself term insurance of 50 lakhs and LIC of 10 lakhs. Also I purchased LIC Child Money back of 10 lacs and SBI smart chap 5 lacs for my daughter education. I want to plan my retirement at the age of 55. How should i plan my retirement 5cr corpus?? Is it enough or shall i invest more??
Ans: Current Financial Situation
Age: 41

Dependents: Wife and 10-year-old daughter

Monthly Income: Rs. 2.20 lakh

Monthly Expenses: Rs. 70,000

Assets:

Equity Stocks: Rs. 1 lakh
Mutual Funds (lumpsum): Rs. 15 lakhs
Fixed Deposit (FD): Rs. 11 lakhs
National Savings Certificate (NSC): Rs. 10 lakhs
Provident Fund (PF): Rs. 26 lakhs
Investments:

SIP: Rs. 35,000 monthly (started in 2023)
Public Provident Fund (PPF): Rs. 1.5 lakhs p.a. (from 2022)
National Pension Scheme (NPS): Rs. 1 lakh p.a. (from 2022)
Sukanya Samriddhi Yojana (SSY): Rs. 1.5 lakhs p.a. (from 2020)
PPF for Wife: Rs. 1 lakh p.a. (from 2022)
PPF for Daughter: Rs. 50,000 p.a. (from 2023)
Insurance:

Family Medical Insurance: Rs. 10 lakhs
Term Insurance: Rs. 50 lakhs
LIC: Rs. 10 lakhs
LIC Child Money Back: Rs. 10 lakhs
SBI Smart Champ: Rs. 5 lakhs
Retirement Planning
Goal
Retirement Age: 55

Desired Corpus: Rs. 5 crores

Evaluation
Given your current investments and future contributions, let’s assess your path to achieving a Rs. 5 crore corpus.

Existing Investments
Equity Stocks: Rs. 1 lakh
Mutual Funds: Rs. 15 lakhs
Fixed Deposit: Rs. 11 lakhs
NSC: Rs. 10 lakhs
Provident Fund: Rs. 26 lakhs
Regular Contributions
SIP: Rs. 35,000 per month
PPF: Rs. 1.5 lakhs per year
NPS: Rs. 1 lakh per year
SSY: Rs. 1.5 lakhs per year
PPF for Wife: Rs. 1 lakh per year
PPF for Daughter: Rs. 50,000 per year
Recommended Strategy
Increase SIP Contributions
SIP Increase: Consider increasing your SIP to Rs. 50,000 per month.
PPF and NPS Contributions
Maintain PPF Contributions: Continue with Rs. 1.5 lakhs p.a. for yourself and Rs. 1 lakh p.a. for your wife.
NPS Contributions: Continue with Rs. 1 lakh p.a.
Sukanya Samriddhi Yojana (SSY)
Continue SSY: Maintain Rs. 1.5 lakhs p.a. contribution for your daughter.
Review and Adjust
Regular Reviews: Annually review your investments and make necessary adjustments.
Reallocate: If necessary, reallocate funds to more promising investment avenues.
Insurance Coverage
Increase Term Insurance: Consider increasing your term insurance to Rs. 1 crore.
Adequate Coverage: Ensure your health insurance coverage is adequate for your family’s needs.
Long-Term Investments
Diversify: Invest in diversified mutual funds and avoid over-reliance on direct stocks.
Regular Funds: Invest through a Mutual Fund Distributor (MFD) with CFP credentials for regular fund benefits.
Education and Marriage Fund
Child Education: Plan for your daughter’s higher education through SIPs in child education plans.
Marriage Fund: Start a separate SIP for her marriage expenses.
Final Insights
Your current investments and contributions are on the right track. Increasing your SIP and ensuring adequate insurance will help you achieve your retirement goal of Rs. 5 crores. Regularly review and adjust your portfolio to stay aligned with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Latest Questions
Ravi

Ravi Mittal  |431 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 22, 2024Hindi
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Relationship
A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

...Read more

Milind

Milind Vadjikar  |682 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
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Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...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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