HI, I am 52 , working in a MNC earning around Rs 2 lacs in hand , We have 2 kids, daughter doing final in graduation and son in 11th grade. I am writing to seek advice about my retirement as I have absolutely no desire/motivation to work now. Below is my financial status. Pl advice whether I should retire or not. We have around 1.1 cr in mutual funds . I will get around 12 lacs in gratuity. We get rent of approx. Rs 25K/month gross Besides the house we live in , we have 3 other properties worth 1cr.I have no EMI's . My monthly expenses are around 60 k . reason for my desire to retire as I want to spend lot of time with him which currently I can't ,due to job. Otherwise also I am fed up of jobs now as have never been too successful and reach top levels. Kindly advice.
Ans: Current Financial Situation
You earn Rs. 2 lakh per month, which is a strong income base.
Your family includes your wife and two children. Your daughter is in her final year of graduation, and your son is in 11th grade. Their education and well-being are critical factors in your decision.
You have no EMIs, which is a significant relief and indicates a strong financial position.
Your mutual fund portfolio is worth Rs. 1.1 crore. This is a substantial investment, and its growth potential should be evaluated.
You will receive Rs. 12 lakh in gratuity, a helpful addition to your retirement corpus.
You also earn Rs. 25,000 per month as rental income. This income can be an essential part of your retirement plan.
You own three additional properties valued at Rs. 1 crore. These properties can offer financial security, though they might require ongoing maintenance and management.
Your monthly expenses are Rs. 60,000. This includes living costs, education, and other necessities.
Evaluating Retirement Readiness
At 52, you are close to the typical retirement age in India, and your financial status suggests that you are in a good position to consider early retirement.
Your desire to retire is driven by a need for more personal time and a lack of motivation to continue working. This is an important factor, as retirement is not just about financial readiness but also about emotional and mental preparedness.
Your children are still in their education phase. Ensuring their future without financial stress is crucial.
You have a solid financial base, but it is essential to assess whether this base can support your desired lifestyle post-retirement.
Given your monthly expenses, your current investments, and your rental income, you need to determine if your existing assets can sustain your family comfortably for the next 30-35 years, assuming a long life expectancy.
Analysing Mutual Fund Portfolio
Your mutual fund portfolio is worth Rs. 1.1 crore. This is a good start, but you must ensure it grows adequately over the years to support your retirement.
Since you have not mentioned the type of funds you are invested in, it is crucial to review your portfolio. Active management by a Certified Financial Planner can help optimise returns, especially since you will need to rely on this corpus during retirement.
Consider reallocating or diversifying your investments to align with your retirement goals. Focus on actively managed funds through a trusted Mutual Fund Distributor (MFD) with a CFP credential to ensure steady growth.
Rental Income and Property Management
Your rental income of Rs. 25,000 per month adds to your financial security. However, rental income can fluctuate due to tenant turnover, market conditions, or maintenance issues.
The properties you own are valuable assets, but real estate can be illiquid. Selling them quickly during a financial need might be challenging.
If managing multiple properties becomes a burden during retirement, you might consider simplifying your real estate holdings. However, selling real estate to reinvest in other assets should be done cautiously and with professional guidance.
Gratuity and Lump Sum Management
You will receive Rs. 12 lakh as gratuity. This lump sum can be added to your retirement corpus.
Consider placing this amount in a safe, growth-oriented investment. Avoid locking it into low-growth instruments like fixed deposits unless you need immediate liquidity.
A portion of this amount can be invested in mutual funds with the help of a Certified Financial Planner, focusing on long-term growth.
Monthly Expenses and Inflation Impact
Your monthly expenses of Rs. 60,000 are manageable with your current income. However, these expenses will likely increase over time due to inflation.
Over a 30-35 year retirement period, inflation can significantly impact your purchasing power. Planning for inflation is essential to ensure your retirement corpus lasts.
You should aim to build a corpus that not only meets your current expenses but also allows for future cost increases. Adjusting your lifestyle to keep expenses in check while allowing for occasional splurges can help maintain financial stability.
Education Expenses for Children
Your children’s education is an ongoing expense. Your daughter is in her final year of graduation, so her educational costs will likely decrease soon.
Your son, currently in 11th grade, will require financial support for at least the next 5-6 years. This might include undergraduate studies and possibly higher education, depending on his career path.
Ensuring that you have a dedicated fund for their education will prevent dipping into your retirement corpus. You may want to explore setting aside a portion of your gratuity or rental income specifically for this purpose.
Emotional and Lifestyle Considerations
Your desire to spend more time with your family, particularly your son, is a valid reason to consider early retirement.
Retirement should not just be a financial decision but also a lifestyle choice. If your job no longer brings you satisfaction and your financial situation allows it, retirement could be a positive change.
Consider how you will spend your time post-retirement. Engaging in hobbies, volunteering, or even part-time work can keep you active and mentally stimulated.
Assessing the Need for Professional Guidance
A Certified Financial Planner can help you assess your readiness for retirement. They can review your portfolio, suggest reallocation if needed, and provide a comprehensive retirement plan.
Regular reviews of your financial plan can ensure that you stay on track even after retirement.
Consider seeking professional advice to ensure that your financial decisions align with your retirement goals and provide long-term security for your family.
Finally
You are in a strong financial position, but the decision to retire should be based on a thorough evaluation of your long-term financial needs.
Consider how inflation, unexpected expenses, and your children’s future needs might impact your retirement corpus.
Regular reviews of your financial plan, with the help of a Certified Financial Planner, can help you stay on track.
Retirement is not just about financial security; it is also about emotional and mental satisfaction. If retiring now allows you to spend more time with your family and live a fulfilling life, it might be the right choice.
However, ensure that your financial plan can support this decision. A well-planned retirement will allow you to enjoy your time without the stress of financial uncertainty.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in