Hi Sir, I am 60year old. Having around 4 crore in stocks(2crore), MF(1cr) and FDs(15lac) ULIP(50lac). I am getting 42k rental income. I want to retire in two years. I want to have 2 lac monthly returns from above. Please advise is it sufficient. Apart from above I have one plot to sell(1.2crore). Mohan.

Ans: Reaching the retirement stage is a significant milestone. You have made commendable financial decisions over the years. Let’s assess your current financial position and determine if it can support your retirement goal of Rs 2 lakh monthly.

1. Overview of Your Current Financial Assets
You currently have a diverse portfolio, which is a good strategy for retirement planning. Your assets include:

Stocks: Rs 2 crore
Mutual Funds: Rs 1 crore
Fixed Deposits: Rs 15 lakh
ULIP: Rs 50 lakh
Rental Income: Rs 42,000 per month
Potential Sale of Plot: Rs 1.2 crore
Your total assets amount to approximately Rs 4 crore.

2. Monthly Income Requirement
You aim to have a monthly income of Rs 2 lakh. Let’s evaluate how your current assets can generate this income:

Rental Income: You receive Rs 42,000 monthly. This provides a solid base.

Investment Income: You need to derive the remaining amount from your investments.

3. Income from Investments
To achieve your target monthly income, let’s break down how you can generate additional income from your investments.

Equity and Mutual Funds: Generally, equity investments can yield returns of about 10-12% annually. This means:

On Rs 2 crore in stocks, you might expect around Rs 20-24 lakh per year, or approximately Rs 1.66-2 lakh monthly.

For Rs 1 crore in mutual funds, assuming similar returns, you can expect around Rs 10-12 lakh per year, or approximately Rs 83,000-1 lakh monthly.

Fixed Deposits: Fixed deposits generally offer lower returns. Assume an interest rate of about 6%:

On Rs 15 lakh, this yields around Rs 90,000 annually, or about Rs 7,500 monthly.

ULIP: This can provide returns based on market performance. However, the performance can vary widely. It's essential to evaluate if you need to continue holding this investment.

4. Total Potential Monthly Income
Let’s compile the monthly income sources:

From Rental: Rs 42,000

From Stocks: Rs 1,66,000 (using lower expected returns)

From Mutual Funds: Rs 83,000 (using lower expected returns)

From Fixed Deposits: Rs 7,500

Total potential income = Rs 42,000 + Rs 1,66,000 + Rs 83,000 + Rs 7,500 = Rs 2,98,500

5. Income from Selling the Plot
Selling your plot for Rs 1.2 crore can significantly boost your financial standing.

Reinvestment Potential: You can invest this amount in assets that generate regular income.

If you place this amount in fixed income securities yielding around 6-7%, you could earn Rs 72,000 to Rs 84,000 per annum, or about Rs 6,000 to Rs 7,000 monthly.
6. Evaluating Your Current Financial Strategy
It is vital to assess whether your current strategy aligns with your retirement goals.

ULIP Assessment: Since ULIPs blend insurance with investment, consider surrendering it. You can reinvest the proceeds in actively managed mutual funds. These funds often outperform ULIPs due to better management and no high charges.

Focus on Active Investments: Actively managed funds can adapt to market conditions. This approach may provide better returns than passive options like index funds, which may not always yield optimal results.

7. Tax Implications on Investments
Understanding the tax implications of your investments is essential:

Equity Mutual Funds:

Long-Term Capital Gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.

Short-Term Capital Gains (STCG) are taxed at 20%.

Fixed Deposits: The interest earned is taxed as per your income tax slab.

ULIP: The maturity amount is tax-free if the annual premium is less than Rs 2.5 lakh.

8. Planning for Future Expenses
While planning your retirement, consider future expenses:

Healthcare Costs: Medical expenses tend to increase with age. Ensure you have adequate health insurance coverage.

Emergency Fund: Maintain a fund for unexpected expenses. This protects your investments.

Child’s Future: If you have educational expenses for your child, plan for those costs.

9. Making Adjustments for Retirement
To enhance your retirement readiness, consider these strategies:

Review and Adjust Investments: Regularly review your investment portfolio. Make adjustments based on market conditions and your risk appetite.

Generate Additional Income: Explore side income options to enhance your monthly income.

Stay Informed: Keep abreast of market trends. This helps in making informed decisions.

10. Seeking Professional Guidance
Navigating retirement planning can be complex. Consider consulting a Certified Financial Planner for tailored advice.

Personalized Strategy: A professional can help develop a strategy based on your unique situation and goals.

Regular Reviews: Schedule periodic reviews to adjust your plan as necessary.

11. Importance of Monitoring Your Finances
Monitoring your financial health is crucial for a successful retirement:

Track Your Progress: Regularly review your income and expenses. This ensures you stay on track.

Use Financial Tools: Leverage financial tools or apps for better management of your finances.

12. Planning for the Unexpected
Retirement can bring surprises. Be prepared for unexpected changes:

Adjust for Inflation: Ensure your investment returns outpace inflation. This maintains your purchasing power.

Plan for Longevity: As life expectancy increases, ensure your plan accommodates a longer retirement.

13. Creating a Flexible Withdrawal Strategy
Develop a flexible withdrawal strategy for your retirement funds:

Dynamic Withdrawals: Consider adjusting your withdrawals based on market conditions.

Preserve Capital: Focus on preserving your capital while generating income.

14. Final Insights
Your current assets are adequate to support your retirement goal of Rs 2 lakh monthly.

With a potential income of around Rs 2.98 lakh monthly from your current assets, you are well-positioned for retirement.

Consider selling your plot and reinvesting the proceeds for better returns.

A Certified Financial Planner can help refine your strategy. This ensures you have a well-rounded approach for your retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner

www.holisticinvestment.in

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