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Ramalingam Kalirajan |7411 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 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

Question by Ravindra on Jul 09, 2024Hindi

Dear Sir, I am 56 running. My wife 50 running. We earn Rs 1.5 Lacs in total. Investment in MF 65 L ITS CURRENT VALUE 119L., HDFC Life get matured in 2027 will get 40L.,PPF both 60L,FDs 40L,Get Rent 23K. LIVE In Own Home. Flats , Plots worth 3 Cr. Daughter Perusing MDS in Pune , Son Perusing B'tech NIT 3rs year. Son Planning to go further studies in US/UK I run Engg Unit invested 2.5 Cr in it. Gets 60k to 1L Per month. No loan. How do i plan my further like so that i can get Rs 2 L per month after in our 60s

Ans: Your detailed financial situation provides a solid base to plan for your retirement. It's clear that you have been diligent in your financial planning and investments so far. Let's further fine-tune your strategy to ensure you achieve a monthly income of Rs 2 lakhs after you turn 60.

Current Financial Overview
Income: Rs 1.5 lakhs per month from combined earnings and Rs 23,000 from rent.
Investments:
Mutual Funds: Rs 119 lakhs
HDFC Life Policy: Maturing in 2027 for Rs 40 lakhs
PPF: Rs 60 lakhs
FDs: Rs 40 lakhs
Real Estate: Flats and plots worth Rs 3 crores
Engineering Unit: Invested Rs 2.5 crores, generating Rs 60,000 to 1 lakh per month.
Family: Daughter pursuing MDS in Pune, son in 3rd year of B.Tech at NIT with plans for further studies abroad.
Financial Goals
Your primary goal is to ensure a stable monthly income of Rs 2 lakhs after 60. Let's break down how we can achieve this.

Immediate Focus Areas
Debt Management
Since you have no loans, this is a good position to be in. Continue maintaining this debt-free status as it will help you allocate more funds towards your investments and retirement savings.

Emergency Fund
Ensure you have a sufficient emergency fund. This should be around 6-12 months of your monthly expenses. Given your current income and responsibilities, Rs 12-15 lakhs in a liquid fund or high-interest savings account is advisable.

Investment Strategy
Mutual Funds
Your current mutual fund investment of Rs 65 lakhs has grown to Rs 119 lakhs, showing a healthy return. This reflects good management and the power of compounding.

Equity Mutual Funds
Continue focusing on equity mutual funds for long-term growth. They are essential for beating inflation and growing your wealth. Diversify across large-cap, mid-cap, and multi-cap funds. These funds provide a balance of stability and growth.

Debt Mutual Funds
Include debt mutual funds for stability and predictable returns. These are less volatile compared to equity funds and can be used to balance your portfolio. They are ideal for your short-term goals and as a source of regular income.

Hybrid Mutual Funds
Consider hybrid mutual funds which offer a mix of equity and debt. They provide balanced growth and stability. This blend can be beneficial as you approach retirement, ensuring steady returns while mitigating risks.

PPF and Fixed Deposits
Your PPF and FDs are excellent for risk-free returns. However, the interest rates may not be sufficient to meet all your post-retirement needs.

PPF
Continue contributing to your PPF account as it offers tax-free returns. This is a safe investment, and the compounded interest over time will provide a substantial corpus.

FDs
FDs are good for fixed returns, but consider moving a portion to more lucrative investment options as you near maturity. Diversify to balance between security and growth.

HDFC Life Policy
Your HDFC Life policy maturing in 2027 will provide Rs 40 lakhs. This lump sum can be reinvested to generate regular income during retirement. Plan to reinvest in a mix of mutual funds and other income-generating assets for sustained returns.

Engineering Unit
Your engineering unit is a significant asset, generating Rs 60,000 to 1 lakh per month. Ensure it's well-managed and consider succession planning.

Business Continuity
If the business can continue post-retirement, it can be a steady income source. Alternatively, evaluate the potential for selling the business when you retire, which could provide a large sum for reinvestment.

Children's Education
Your children’s education is a priority.

Education Funds
Ensure dedicated education funds for your son’s further studies abroad. This can be a substantial expense, and planning early is crucial.

Loans for Education
Consider education loans for your son’s higher studies. These loans are typically at favorable interest rates and provide tax benefits.

Creating a Monthly Income Stream
To achieve Rs 2 lakhs per month after 60, a combination of different income streams will be required.

Systematic Withdrawal Plan (SWP)
Set up SWPs from your mutual fund investments. This allows you to withdraw a fixed amount regularly. Choose equity or hybrid funds for higher returns and debt funds for stability.

Dividend Income
Invest in mutual funds with a good track record of dividends. These funds provide regular dividend payouts which can supplement your income.

Rent from Real Estate
Your real estate provides Rs 23,000 per month. Ensure these properties are well-maintained and rented out. Consider reviewing the rent periodically to match market rates.

Fixed Deposits and PPF
Set up FDs with monthly interest payouts to provide a steady income stream. Use PPF maturity proceeds for lump sum investments in retirement-friendly schemes.

Reinvesting Lump Sums
When your HDFC Life policy matures in 2027, reinvest the Rs 40 lakhs wisely. Consider mutual funds, balanced advantage funds, or other high-yielding options.

Risk Management
Health Insurance
Ensure you have adequate health insurance coverage for yourself and your wife. Medical expenses can be significant, and having a comprehensive health insurance plan is crucial.

Life Insurance
Consider term insurance to cover any outstanding liabilities and to provide financial security to your family. Ensure your coverage is sufficient to meet their needs in your absence.

Regular Review and Rebalancing
Financial planning is dynamic and requires regular review.

Annual Review
Review your financial plan annually. Adjust investments based on performance, market conditions, and changes in personal circumstances.

Rebalancing Portfolio
Regularly rebalance your portfolio to maintain the desired asset allocation. This ensures you are not overexposed to any single asset class and helps manage risk effectively.

Estate Planning
Ensure your estate planning is in order.

Will and Nomination
Create a will to ensure smooth transfer of assets. Nominate beneficiaries for all your financial accounts and investments.

Trusts
Consider setting up trusts if required, especially for managing large assets and ensuring their efficient distribution.

Final Insights
Your diligent planning and diverse investments have put you in a strong financial position. Continue focusing on a balanced approach, leveraging the power of mutual funds, and maintaining liquidity for short-term needs. Ensure regular reviews and adjustments to stay on track with your financial goals.

With disciplined investing, risk management, and strategic reinvestments, you can achieve the desired monthly income of Rs 2 lakhs post-retirement. Your financial prudence today will ensure a comfortable and secure future for you and your family.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

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.