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54-Year-Old Widower with Investment Portfolio Worries About Daughter's Future

Ramalingam Kalirajan |6287 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 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 13, 2024Hindi

Hi, I am 54 years , Working at senior level. I lost my wife few years back and have teenage daughter. I have below investments Diversified MF-3.5Cr Equity - 3Cr, EPF - 2 Cr, FD - 1.5Cr, PPF - 60L, Gold - 1Cr, House 1 - 1.25Cr, House 2 - 1.00Cr, House 3 - 2.00Cr, House 4 - 1.25 Cr, NPS -10L Rent inflow- 100K/Month Annuity -24K/year Dividend -3 Lac/year Interest - 10L/year from Bond, FD Income - 8L/mth after tax. Investments MF- 3.2 L SIP/Month PPF - 1.5L /Year NPS -50k/ Year Term ins. - 2.5 Cr Mediclaim- 50L Family floater. Mediclaim corporate -2.00 Cr Cash in hand - 20L Expense Fees - 13L/ year Others -17 L/year Liabilities None I am always under tremendous pressure that It might fall short after retirement. My daughter is very young. From the above status, I need your help to understand if she will be able to get good life without dependencies. Honestly not many close relatives whom I can depend. Though I am very well educated this fear and worry of my daughter , I always feel insecure and not able to enjoy life. I need your help to let me know if I retire or in my absence , my daughter’s future is safe financially. Will this investment be able to generate inflation adjusted 5L-6L per month? after say 5-6years . Is my financial investments are sustainable to allow me retire now and generate the required inflow for my kid ? Is there any change needed in investment pattern or if any asset class is missing ? please guide me.

Ans: Your current financial situation is quite strong. With Rs 3.5 crores in mutual funds, Rs 3 crores in equity, and significant assets like EPF, PPF, fixed deposits, and gold, you’ve built a solid foundation. You also own four properties and have multiple income streams, including rental income, dividends, and interest from bonds and fixed deposits.

Your monthly income is Rs 8 lakhs after tax, and you have no liabilities, which further strengthens your financial position. Your daughter is still young, and her future is your primary concern, which is natural given your circumstances.

Assessing Your Income Streams
Rental Income: Rs 1 lakh per month is steady and reliable.

Annuity Income: Rs 24,000 per year is minimal but adds to your overall income.

Dividend Income: Rs 3 lakhs per year from equity investments is beneficial, especially if these are growing over time.

Interest Income: Rs 10 lakhs per year from bonds and FDs is a substantial contribution to your income.

These income streams are diverse, which is positive, but ensuring they grow with inflation is crucial.

Evaluating Your Investments
Your investment portfolio is well-diversified, including mutual funds, equities, EPF, PPF, and gold. However, you may need to assess the balance between these investments to ensure they are aligned with your goals.

Mutual Funds: Rs 3.5 crores is a significant amount. Ensure these funds are actively managed to maximize returns.

Equity Investments: Rs 3 crores in direct equities is substantial. Equity investments generally provide higher returns over the long term but can be volatile.

EPF and PPF: These provide stability and tax-free returns, making them essential for retirement planning.

Fixed Deposits: Rs 1.5 crores in FDs offers security but may not keep up with inflation. Re-evaluating a portion of this might be wise.

Gold: Rs 1 crore in gold is a good hedge against inflation. Gold is a safe investment, though it doesn’t generate regular income.

Real Estate: You own four properties worth Rs 5.5 crores in total. These provide rental income but are not very liquid.

Securing Your Daughter’s Future
Your concern for your daughter’s future is valid. Ensuring she is financially secure in your absence is crucial.

Term Insurance: You have a Rs 2.5 crore term insurance, which is a good safety net. This will ensure your daughter is financially secure if anything happens to you.

Mediclaim: Rs 50 lakhs family floater and Rs 2 crore corporate cover are robust. These will protect you and your daughter from medical expenses.

NPS: Rs 10 lakhs in NPS will contribute to your retirement corpus. Continue contributing to this, but don’t rely solely on it for retirement.

Projecting Future Income Needs
You’re concerned about generating Rs 5-6 lakhs per month after 5-6 years, adjusted for inflation. Let’s break it down:

Inflation: Assuming inflation at 6-7%, Rs 5-6 lakhs per month today would be equivalent to Rs 7-8 lakhs per month in 5-6 years.

Investment Growth: Your current investments need to grow at a rate that outpaces inflation to meet this future need.

Evaluating Your Retirement Readiness
Given your assets and income, you’re in a strong position to retire soon. However, ensuring your investments can generate the required income post-retirement is key.

Mutual Funds and Equities: Continue to invest in growth-oriented mutual funds and equities. These can provide the necessary growth to meet your future income needs.

Fixed Deposits and Bonds: Consider shifting some FDs to more growth-oriented investments. Bonds are safer, but they may not generate enough income to keep up with inflation.

Gold: Hold on to your gold investments as they provide a good hedge against inflation.

Addressing Your Concerns
You’re worried about your daughter’s future and your ability to provide for her. This worry is understandable but may not be necessary given your strong financial position.

Emergency Fund: Ensure you have an emergency fund that covers at least a year’s worth of expenses. This fund should be easily accessible.

Will and Estate Planning: Create a will and plan your estate to ensure your daughter is taken care of in your absence. This will provide peace of mind.

Making Adjustments to Your Investment Pattern
Your current investment pattern is solid, but there’s always room for improvement.

Review Asset Allocation: Consider reallocating some of your fixed deposits and low-growth investments into higher-yielding options like equity mutual funds.

Focus on Growth: Given your need for Rs 5-6 lakhs per month in the future, focus on investments that offer higher returns. Equities and equity-oriented mutual funds are essential in this regard.

Regular Portfolio Reviews: Meet with your certified financial planner regularly to review your portfolio. Make adjustments based on market conditions and your changing needs.

Final Insights
You’ve done an excellent job building a strong financial foundation for yourself and your daughter. Your diversified investments and multiple income streams provide a robust safety net. However, focusing on growth and ensuring your portfolio is aligned with your future income needs is essential.

Your current investments are likely sufficient to generate the Rs 5-6 lakhs per month you desire in 5-6 years, adjusted for inflation. Continue investing in growth-oriented options, regularly review your portfolio, and make adjustments as needed.

Your daughter’s future is secure, and with careful planning, you can retire with confidence. You’re in a strong financial position, and with the right strategy, you’ll continue to be so.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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