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51-Year-Old with Family in US and India: Retirement Plan, Where to Stay?

Ramalingam Kalirajan |6558 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 09, 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 - Sep 09, 2024Hindi

i am 51 years , having one son (middle school) duaghter (persuing engineering) and curretly in US. i have one 2bhk (1cr) and 1BHK ( 0.7 cr) and ancentral home where my parents staying (all in india). 1 CR. equity portfolio, 0.8 cr Retirals (pf, gratuttiy supernuation etc). I am curretnly deputed in US, if I work here another 10 years here then social security could be 1500 $ per month, Can work upto 67 years. I have another bank savings of $100 k and $25K as 401, My spouse wants to buy and stay small house here and stay, my father and mother (75+) wanted to come back india after daughter get settled in US. I have no idea or plan what to do, if i think of future , I start getting severe headache. What is my retirement plan, where to stay? how after retiremnet life will be in india ? how to do mange. I am just keep going....

Ans: You are 51 years old, with two children—your son is in middle school and your daughter is pursuing engineering. You currently live in the US on deputation, and have the option to work until the age of 67.

You own multiple properties in India, which include:

A 2 BHK house worth Rs. 1 crore.
A 1 BHK house worth Rs. 0.7 crore.
An ancestral home where your parents (aged 75+) reside, valued at Rs. 1 crore.
In addition, you have the following assets:

Rs. 1 crore in your equity portfolio.
Rs. 0.8 crore in retirals (Provident Fund, gratuity, superannuation, etc.).
Bank savings of $100,000.
$25,000 in a 401(k) account.
Your spouse wishes to buy a small house in the US, while your parents prefer to return to India after your daughter is settled in the US.

Retirement Goals and Key Questions
You're unsure where to retire and how to manage your post-retirement life. These are complex decisions, but breaking them down will make them easier to handle.

Key questions to address:

Should you buy a home in the US or continue living in India after retirement?
How will your retirement savings support your future lifestyle?
What is the most effective way to manage your current assets and savings?
How can you plan for your parents' care and your children's education, while securing your future?
Let’s address each of these aspects in detail.

Housing and Location Decisions
Buying a House in the US
Your spouse is interested in buying a small house in the US. Before making this decision, you need to carefully consider:

Costs of Home Ownership in the US: Purchasing a house in the US will come with significant costs, including mortgage payments, property taxes, maintenance, and insurance. Assess whether your current income and savings can handle these costs without straining your retirement funds.

How Long You Plan to Stay in the US: If you plan to work for the next 10 years, buying a house could make sense, as you would have enough time to pay off part of the mortgage. However, if you plan to return to India after retirement, it may be better to rent a home rather than buy one, as homeownership may not provide enough financial benefit in the long term.

Dual Living: If you buy a house in the US but intend to spend a significant amount of time in India, you will also need to factor in the cost of maintaining two households. This can be financially draining.

Staying in India Post-Retirement
Your parents prefer to return to India, and this may be the best long-term option for you as well. Key reasons to consider retiring in India:

Lower Living Costs: Living expenses in India are generally lower than in the US, particularly in smaller towns or cities. You could live comfortably on a lower budget, freeing up more of your retirement savings for other purposes.

Familiar Environment and Support: You have property in India, and your parents are settled there. Staying close to your family network can provide emotional support and reduce the stress of managing multiple homes across countries.

Medical Costs and Care: Healthcare costs in India, even in private hospitals, are more affordable compared to the US. You can invest in a comprehensive health insurance plan that will cover your medical needs in retirement.

Selling One Property: You could sell one of your properties in India—either the 1 BHK or 2 BHK—and use the funds to support your lifestyle or cover any future costs for your children. The proceeds could also be invested in more liquid assets to provide a steady income during retirement.

Financial Portfolio and Investments
Your financial portfolio is solid, but there is room for improvement to make it work harder for your retirement goals.

Equity Portfolio (Rs. 1 crore)
Reassess Risk Exposure: You have a substantial equity portfolio, which is good for long-term wealth generation. However, as you approach retirement, it's important to balance your portfolio by reducing exposure to high-risk equities and increasing allocation to safer assets.

Diversification: Ensure that your equity portfolio is well-diversified across sectors and geographies. If your portfolio is concentrated in a few stocks or sectors, you may be taking on unnecessary risk.

Retirals (Rs. 0.8 crore)
Utilization: Provident Fund, gratuity, and superannuation are relatively safe and provide liquidity. These funds should form a part of your retirement income. You can use these to generate a regular income stream post-retirement through systematic withdrawals.
Bank Savings and 401(k)
$100,000 Bank Savings: You should aim to keep at least 6-12 months of expenses in liquid form. The rest of the bank savings can be deployed into investments that offer better returns.

401(k) Investments: Since you only have $25,000 in your 401(k), continue contributing to this as long as you are working in the US. Maximize employer matching contributions, if available, to build this up.

Social Security ($1,500 per Month)
Understanding Social Security: You expect to receive $1,500 per month from US Social Security if you work for another 10 years. This amount, while useful, may not be enough to cover all expenses. Consider it as a supplementary income source.

India-US Retirement Mix: Combine your US social security income with income from your Indian investments and retirals. This can give you a more complete financial picture for retirement.

Retirement Income Plan
To live a comfortable life in retirement, you need to create multiple streams of income. Here's how to go about it:

Equity SIPs: If you're not currently investing in Systematic Investment Plans (SIPs), it’s a good time to start. SIPs in well-managed mutual funds can offer long-term growth and help you maintain a steady income in retirement. Focus on active funds, as they tend to outperform index funds in volatile markets.

Regular Withdrawals from Retirals: As mentioned earlier, you can systematically withdraw from your Provident Fund and superannuation over time. This will ensure liquidity during retirement.

Dividend Income: If your equity portfolio includes dividend-paying stocks, use the dividend income as part of your retirement income stream. Over time, dividends can form a stable part of your cash flow.

Family Considerations
Education for Your Children
Daughter’s Education: Your daughter is pursuing engineering, which can be expensive. Ensure you have adequate savings set aside for her tuition and living expenses, especially if she plans to pursue higher studies in the US.

Son’s Future Education: As your son is still in middle school, you have time to plan for his higher education. Set up an education fund for him, either through a mix of SIPs and fixed-income investments, to cover these future costs.

Parents’ Health and Support
Health Care: Your parents are in their mid-70s. It’s essential to have health insurance for them in India. You should also plan for potential long-term care needs in case they require assisted living or in-home care in the future.

Living Arrangements: Since your parents plan to return to India, you may need to consider making the ancestral home more comfortable for them as they age. This may include renovations or adjustments for senior-friendly living.

Final Insights
Your portfolio is strong, but it needs balancing for long-term stability.

Focus on securing both US and India-based income streams for a steady post-retirement lifestyle.

Consider selling one of your properties in India and reinvesting the proceeds to ensure liquidity.

Your children’s education and your parents' health are key priorities that require planned savings and insurance coverage.

Assess whether buying a house in the US is truly necessary, or if renting would allow for more flexibility.

With a comprehensive plan, you can manage your assets and secure a peaceful retirement without financial stress.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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