63-Year-Old Retiree With Land Assets: How Much to Save?

Ans: It's commendable that you're thinking ahead about your retirement and your child's education. Let's assess your financial situation and estimate the corpus required for your retirement and your daughter's education:

Retirement Corpus:
Consider factors such as your desired retirement age, expected lifespan, estimated post-retirement expenses, and inflation.
Determine your retirement income needs, including living expenses, healthcare costs, and leisure activities.
Calculate the corpus required to generate the desired income using conservative withdrawal rates and factoring in inflation.
Child's Education Corpus:
Estimate the cost of your daughter's education, including tuition fees, accommodation, and other related expenses.
Consider the inflation rate for education expenses and the duration until your daughter enters college.
Calculate the corpus required to fund her education using a combination of savings, investments, and education loans if necessary.
Additional Considerations:
Take into account any other financial goals or obligations, such as buying a car or funding vacations.
Review your existing investments and savings to determine how much additional corpus you need to accumulate to meet your goals.
Developing a Financial Plan:
As a Certified Financial Planner, I recommend developing a comprehensive financial plan that addresses your retirement and education funding needs.
Consider various investment options, asset allocation strategies, and risk management techniques to achieve your goals.
Regularly review and adjust your financial plan as your circumstances change, such as salary increases, changes in expenses, or market fluctuations.
Seeking Professional Advice:
Consult with a financial advisor to analyze your current financial situation, set realistic goals, and create a customized financial plan.
A professional can provide personalized guidance and recommend strategies to help you achieve your retirement and education funding objectives.
By proactively planning for your retirement and your daughter's education, you can ensure a financially secure future for yourself and your family. Remember to stay disciplined in your savings and investment approach, and seek professional advice whenever needed. With careful planning and prudent financial management, you can achieve your goals and enjoy peace of mind.

Ans: Hi, your financial status looks good. Monthly income of Rs 3 to 3.5 lakhs is impressive. Zero debt and invested in land is a strong foundation.

Evaluating Your Current Investments
Your land investment worth Rs 60 lakhs is valuable. Planning to sell it for retirement expenses is a wise decision. Additionally, the rental income of Rs 80,000 monthly is a great passive income source. This rental income can help maintain your lifestyle post-retirement.

Planning for Children's Education
You have two young children. Education costs will rise over time. Your daughter is 8, and your son is 1. For quality education, you need to start planning now. Higher education can be expensive. Consider inflation and future costs.

Monthly Expenses and Savings Needs
You mentioned monthly expenses of Rs 50,000. Let's break down your savings needs:

Children’s Education: Assuming higher education expenses start at 18. Your daughter will need funds in 10 years. Your son in 17 years. Estimate costs based on current fees and inflation rates.

Lifestyle Maintenance: Rs 50,000 monthly expense equals Rs 6 lakhs annually. For 30 years post-retirement, you need a substantial corpus.

Cash and Savings for Retirement
Retiring between 45 to 50 years means early retirement. You need to ensure enough savings. Here’s a breakdown:

Emergency Fund: At least 6 months of expenses. With Rs 50,000 monthly expense, save Rs 3 lakhs in a liquid fund.

Retirement Corpus: Assuming Rs 50,000 monthly expense, you need Rs 6 lakhs annually. For 30 years, you need around Rs 1.8 crores. This is a simplified estimation without accounting for inflation.

Investment Options: Evaluating Gold and Property
You prefer gold and property over shares or mutual funds. Let’s explore these:

Gold Investment
Pros: Gold is a hedge against inflation. It's a tangible asset. Easy to buy and sell.

Cons: No regular income from gold. Prices can be volatile. Storage and security concerns.

Property Investment
Pros: Regular rental income. Property value generally appreciates over time. Tangible asset.

Cons: Requires significant capital. Maintenance and legal issues. Not easily liquidated. Property prices can be volatile.

Alternative Investments
While gold and property are traditional investments, consider diversifying. Here are some alternatives:

Fixed Deposits (FDs)
Pros: Safe and secure. Guaranteed returns. Easy to manage.

Cons: Returns are lower compared to other investments. Interest is taxable.

Public Provident Fund (PPF)
Pros: Tax benefits. Safe investment. Compounded returns.

Cons: Lock-in period of 15 years. Limited flexibility.

National Pension System (NPS)
Pros: Retirement-focused. Tax benefits. Partial equity exposure.

Cons: Long lock-in period. Annuity purchase on maturity.

Risks and Diversification
It's important to diversify your investments. Putting all your money in one asset class increases risk. Diversification helps in balancing risk and returns.

Advantages of Diversification
Risk Management: Spreads risk across different asset classes.

Potential for Higher Returns: Different assets perform well at different times.

Liquidity: Access to funds when needed.

Power of Compounding
Compounding is powerful. It’s earning returns on your returns. The earlier you start, the more you benefit. Even small, regular investments grow significantly over time.

Empathy and Understanding
Your cautious approach towards investments is understandable. Everyone has different risk appetites. It’s important to choose what you're comfortable with.

Certified Financial Planner Insight
As a Certified Financial Planner, I recommend having a balanced portfolio. While you prefer gold and property, consider some exposure to other safe investments. Diversification can protect and grow your wealth.

Assessing Investment Options
Gold: Good for hedging, not for regular income.

Property: Good for rental income, but requires management.

FDs and PPF: Safe, but lower returns.

NPS: Good for retirement, but with a lock-in.

Final Insights
Balancing your investments is key. Keep a mix of safe and growth-oriented assets. Plan for children’s education early. Ensure you have enough savings for retirement. Diversify to manage risks.

Your proactive approach to retirement and children's education is commendable. It's great you’re planning ahead. Make sure to reassess your financial plan regularly.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: First, let's take a moment to appreciate your proactive approach in managing your finances. Both you and your wife have a substantial monthly income of Rs 4,00,000. This is commendable and provides a solid foundation for financial planning.

You have four houses, three of which have loans. The outstanding loan amount is Rs 2,10,00,000, with EMIs totaling Rs 2,12,000. Your property portfolio is valued at Rs 3,85,00,000. Additionally, you have Rs 23,00,000 in Sukanya Samriddhi Yojana (SSY) for your daughters.

Now, let’s break down the steps to ensure a secure financial future for your family and a comfortable retirement.

Managing Debt Effectively
The EMI burden of Rs 2,12,000 is significant, considering it consumes over half of your monthly income. Here’s a strategy to manage this effectively:

1. Prioritize Loan Repayment:

Focus on paying off high-interest loans first. This will reduce your interest burden and free up more funds for savings and investments.

2. Refinance or Consolidate Loans:

If possible, refinance your loans to get a lower interest rate. Consolidating loans can also simplify payments and potentially reduce your interest rate.

Enhancing Savings and Investments
Given that you don't have any provident fund or substantial savings apart from SSY, it’s crucial to start building your savings and investment portfolio.

1. Emergency Fund:

Establish an emergency fund with at least six months of living expenses. This fund should be easily accessible and kept in a savings account or a liquid fund.

2. Systematic Investment Plan (SIP):

Start SIPs in mutual funds to build a diversified investment portfolio. This will help in wealth accumulation over time. Actively managed funds, chosen with the help of a Certified Financial Planner (CFP), can potentially offer better returns than index funds.

3. Sukanya Samriddhi Yojana (SSY):

Continue investing in SSY for your daughters. This is a great tool for their future education and marriage expenses due to its high-interest rates and tax benefits.

Planning for Children's Education
With daughters aged 15 and 10, education expenses will soon be a major financial responsibility. Here’s how to plan for it:

1. Education Savings Plan:

Estimate the future cost of their education and start dedicated SIPs to meet these expenses. An actively managed equity fund can offer higher returns to meet these long-term goals.

2. Education Loan:

Consider education loans to fund higher education. This will distribute the financial burden and provide tax benefits under Section 80E.

Retirement Planning
To ensure a comfortable retirement, you need to start saving and investing aggressively.

1. Retirement Corpus:

Estimate your post-retirement expenses and the corpus required to sustain them. Start SIPs in diversified equity mutual funds to build this corpus. Equity exposure is crucial for long-term growth.

2. Regular Investments:

Invest a portion of your monthly income in mutual funds through a CFP. This professional guidance ensures optimal fund selection and rebalancing to achieve your retirement goals.

Insurance Coverage
Insurance is a critical component of financial planning. Ensure you have adequate coverage:

1. Term Insurance:

If not already covered, purchase a term insurance policy. This will provide financial security to your family in case of any unfortunate event.

2. Health Insurance:

Ensure you have comprehensive health insurance coverage for the entire family. Medical expenses can be a significant drain on savings, and adequate insurance mitigates this risk.

Building an Investment Portfolio
Given the current market trends, it’s essential to diversify your investments. Here’s a plan:

1. Diversified Mutual Funds:

Invest in a mix of large-cap, mid-cap, and small-cap funds. Actively managed funds, recommended by a CFP, can provide superior returns compared to index funds.

2. Debt Funds:

Include debt funds for stability and regular income. These funds are less volatile and provide a steady return.

3. Gold:

Allocate a small portion to gold. It’s a good hedge against inflation and market volatility.

Reducing Risk and Maximizing Returns
Balancing risk and returns is crucial in financial planning. Here’s how to achieve it:

1. Asset Allocation:

Maintain a balanced asset allocation based on your risk tolerance. A mix of equity, debt, and gold ensures stability and growth.

2. Regular Monitoring:

Review your investment portfolio regularly with a CFP. This ensures your investments are aligned with your goals and market conditions.

Tax Planning
Efficient tax planning can enhance your savings and investments. Here’s how:

1. Tax-saving Investments:

Utilize Section 80C by investing in instruments like ELSS funds, PPF, and SSY. These investments offer tax benefits and help in wealth accumulation.

2. Home Loan Benefits:

Claim tax deductions on home loan interest under Section 24 and principal repayment under Section 80C. This reduces your tax liability.

Final Insights
Your current financial situation is challenging but manageable with the right strategies. Focus on reducing debt, enhancing savings, and investing wisely. Seek professional guidance from a Certified Financial Planner (CFP) to navigate complex financial decisions and achieve your goals.

Your proactive approach and commitment to financial planning are commendable. With disciplined saving, prudent investing, and strategic planning, you can secure a comfortable retirement and ensure a bright future for your daughters.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

Ans: Hello;

1. You have 2 options of long term capital gain tax working because you have old land.
a.200-1=199 Lakhs on this a tax of 12.5% i.e.24.875 Lakhs
b.200-x=xyz Lakhs on this a tax of 20%
Where "x" is the inflation indexed cost of acquisition
You may consult a CA for calculating "x" for you and also recommending ways in which you can avoid payment of this tax based on provisions of income tax act.

If you can save on entire tax payment by reinvesting the capital gain from land sale into real estate then it makes sense to invest in real estate. You may rent out part of your real estate to earn rental income.

You may do a monthly sip of `90 K in an equity savings type mutual fund with low to moderate risk for 7 years.

It may grow into a sum of 1 Cr after 7 years assuming modest return of 9%. It may be utilised to fund higher education of your kid and partially funding your retirement income in addition to rental income.

Best Wishes;
X: @mars_invest