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Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 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
Subrata Question by Subrata on May 15, 2024Hindi
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I am 64, retired from private sector. I have SCSS & FD of 57-L - SCSS maturing mid-2025. I had invested jointly most of my savings in MF-sector in 2017(@57) - which has grown thrice since. Since my wife's sudden demise (2019), I had been redeeming considerable amounts & topping-up both my son's portfolios, at intervals(though both are 50-50 nominees to all my portfolios). Kindly advice if the above process is better than making a will with details ? Do you have to register the will ? What is the procedure ?

Ans: Losing a spouse is not just emotionally challenging but can also impact your financial plans. Firstly, my sincere condolences for your loss. Your proactive approach in reassessing your financial strategy reflects wisdom and foresight.

Reviewing Current Strategies

You've opted for a hands-on approach, redirecting funds from mutual funds to support your son's portfolios. While this aids in wealth transfer and may provide comfort, it's essential to evaluate its long-term efficacy.

Comparing Strategies: Direct Support vs. Will

Direct Support:

Immediate assistance to beneficiaries.
Offers control and satisfaction in assisting loved ones directly.
Potential tax implications and estate distribution complexities.
Will Preparation:

Comprehensive documentation of wishes.
Facilitates smooth wealth transfer.
May involve legal costs and probate delays.
Advantages and Disadvantages

Direct Support:

Advantages: Provides immediate financial assistance, fosters family harmony.
Disadvantages: Potential tax consequences, lack of legal protection, unequal distribution risks.
Will Preparation:

Advantages: Ensures assets are distributed as per your wishes, minimizes family conflicts.
Disadvantages: Legal expenses, potential probate delays, lack of immediate support.
Recommendation

Considering your current approach, while supporting your son is commendable, it's prudent to complement it with a comprehensive will. A will ensures your entire estate is distributed according to your desires, minimizing confusion and potential disputes among beneficiaries.

Procedure for Will Preparation

Consult a Professional: Seek assistance from a legal expert or estate planner to draft a will tailored to your requirements.
Documentation: Gather all relevant information regarding your assets, liabilities, and beneficiaries.
Drafting: Work with the professional to outline your wishes clearly and comprehensively.
Review and Finalization: Carefully review the draft to ensure accuracy and alignment with your intentions.
Execution: Sign the will in the presence of witnesses as per legal requirements.
Storage: Store the will securely and inform trusted individuals of its location.
Conclusion

In conclusion, while your current approach of direct support to your son has its merits, complementing it with a will ensures comprehensive estate planning. This dual strategy provides immediate assistance while safeguarding your legacy and minimizing potential conflicts. Consultation with a certified financial planner and legal expert can further refine your strategy to align with your goals.

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.
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Sanjeev

Sanjeev Govila  |458 Answers  |Ask -

Financial Planner - Answered on Sep 20, 2023

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Hello Sanjeev, Good afternoon. Request a serious suggestion on my investment planning. Have majority of my savings into FDs due to my earlier conservative approach and even now am having the tax benefit as the FDs are on my wife's name where we do get the tax benefit. Also started significant portion into MFs which is a portfolio by itself of nearly 50 lac INR. My question is, I want to plan for my younger son's future and our retirement which almost have the same time duration of about 12-13 years. How can I go for my investment if am looking for around 5-7 crore of corpus by then ? What options could you provide me assuming I do have good risk apettite now as I have seen a good 5 year cycle in the MFs now. I want you suggest 2 options, 1 - With a fresh investment now and the products which I should go around and 2 - If you advise to use the fixed deposits also to contribute to the wealth creation ( I have a total of around 60-70 lac as FDs). So please suggest a good portfolio with the above 2 scenarios.
Ans: Based on your query, we understand that you are looking for investment options to plan for your younger son’s future (Education and Marriage) and your retirement life. You have mentioned that both goals have a similar time duration of about 12-13 years. You also mentioned that you have a good risk appetite now and have seen a good 5-year cycle in mutual funds (MFs).

To achieve a corpus of around Rs 5Cr by then, we have evaluated both the options:-

Option 1: Fresh Investment: This is the most recommended option from our end as considering your investment horizon and knowledge, we suggest you to rebalance your current fixed income oriented investments to equity orient funds with 20-25% allocation towards mid and small caps.
Benefits on shifting:
• Lower tax liability on returns generated.
• Tax deferment and compounding (higher returns) in long run.

Option 2: Continuing with Fixed Deposits (FDs) (Not suggested by us)
As you know, FDs are very safe asset class and yielding higher returns due to current interest rate scenario. Although, we all know sooner and later rates will came down to support the economy so does the FD rates.
Also, FDs as investment are not considered good for horizon of more than 5 years because:
a) Yearly taxation reduce the compounding and returns.
b) Equity generally outperform in terms of returns over the same horizon.

Final Recommendation:
We suggest you to shift 30-40 Lakhs from FDs and reinvest the same in a well-diversified portfolio of Equity and hybrid funds. Also, considering your goal of reaching a corpus of 5cr with current mutual fund investments it will require whopping returns of 20%+ on annual basis for a period of 12-13 years which is not very likely to achieve.

As a summary, allocate a total of Rs 80-90 Lakhs towards diversified equity-oriented funds and keep invested Rs 20-30 Lakhs in FDs in your wife’s name for taxation benefit.

..Read more

Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

Asked by Anonymous - Apr 28, 2024Hindi
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I am 55, want to retire. Have total corpus of 7 cr in stocks and MF equity. No life insurance, or ppf, nps, FD etc. Have adequate health insurance.Monthly expense is 1.5 lakhs. Want to leave good corpus in legacy for my son. Please suggest.
Ans: It's admirable that you've accumulated a substantial corpus for your retirement and have a clear goal of leaving a legacy for your son. As a Certified Financial Planner, I'm here to provide guidance on how to make the most of your retirement corpus while ensuring a comfortable lifestyle and leaving behind a meaningful inheritance.

Assess Your Financial Goals:

Before making any decisions, it's crucial to identify your financial goals and priorities. Retirement planning involves striking a balance between maintaining your desired lifestyle and preserving wealth for future generations.

Retirement Income Planning:

With a monthly expense of 1.5 lakhs and a corpus of 7 crores, you'll need to carefully plan your retirement income strategy. Consider creating a systematic withdrawal plan (SWP) from your investment portfolio to ensure a steady stream of income to cover your expenses.

Legacy Planning:

To leave a substantial legacy for your son, it's essential to preserve and grow your wealth over time. Invest a portion of your corpus in growth-oriented assets such as equity mutual funds to generate long-term returns that outpace inflation and build a sizable inheritance.

Diversification and Risk Management:

Diversifying your investment portfolio across different asset classes and sectors can help manage risk and enhance returns. While equities offer the potential for higher growth, consider allocating a portion of your portfolio to fixed-income instruments for stability and income generation.

Estate Planning:

Ensure that you have a comprehensive estate plan in place to distribute your assets efficiently and minimize taxes. Consider creating a will and establishing trusts to protect your wealth and ensure a smooth transfer to your son in the future.

Consult with a Certified Financial Planner:

As a Certified Financial Planner, I strongly recommend consulting with a professional to develop a customized retirement and legacy plan tailored to your specific needs and goals. A CFP can provide personalized advice, address any concerns or questions you may have, and help you navigate complex financial decisions with confidence.

Stay Informed and Engaged:

Stay actively involved in managing your finances and regularly review your investment portfolio to ensure it remains aligned with your goals and risk tolerance. Keep abreast of market trends and economic developments that may impact your investments and adjust your strategy accordingly.

Final Thoughts:

Retirement planning is a journey that requires careful consideration, disciplined saving, and prudent investing. By taking a holistic approach to managing your wealth and seeking professional guidance when needed, you can retire comfortably and leave a meaningful legacy for your son. Remember, it's never too late to start planning for the future, and I'm here to support you every step of the way.

..Read more

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Moneywize

Moneywize   |122 Answers  |Ask -

Financial Planner - Answered on Jun 25, 2024

Asked by Anonymous - Jun 13, 2024Hindi
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Ours is a family of 3 people -- My wife, I and my daughter who is 15. I am 39, my wife is 37 and our monthly expenses are Rs 90K. I own my house and expect to have no fixed income after 65 years, and expect to live till 75. Considering the ever increasing price rise what should be my corpus at 65 for me to continue living the life style I am living today?
Ans: Calculating your retirement corpus:

Here's how to estimate the corpus you'll need to maintain your current lifestyle after retirement:

1. Retirement period:

You plan to retire at 65 and expect to live till 75. So, your retirement period is 75 - 65 = 10 years.

2. Inflation adjustment:

You've rightly considered inflation. To estimate future expenses, we need to factor in inflation. A safe assumption for India is 5-7% inflation. Let's take an average of 6%.

3. Current monthly expenses:

You spend Rs 90,000 per month currently.

4. Future monthly expenses:

To find the monthly expense at retirement (at 65), we need to consider inflation for 26 years (39 years till retirement + 10 years retirement).

You can use an inflation calculator online or a simple formula:

Future monthly expense = Current monthly expense * (1 + Inflation rate)^number of years

In your case, Future monthly expense = Rs 90,000 * (1 + 0.06)^26 ≈ Rs 3,28,550 (approximately Rs 3.29 lakh)

5. Total corpus calculation:

Now you can calculate the total corpus needed. Here's a common approach:

Total corpus = Monthly expense * Number of years in retirement * 12 (months)

However, this method doesn't consider the fact that you'll be withdrawing money every month, reducing the corpus. A more accurate method is using the Time Value of Money (TVM) concept. There are online TVM calculators or Excel functions you can use.

Here's an alternative approach that provides a reasonable estimate:

Multiply the future monthly expense (Rs 3.29 lakh) by a factor considering inflation over the period. This factor can vary depending on your risk tolerance and investment strategy. A factor of 200 is often used as a conservative estimate.
Total corpus = Rs 3.29 lakh/month * 200 (factor) = Rs 6.58 crore (approximately Rs 658 million)

Additional factors to consider:

• Daughter's future expenses: Your daughter will be an adult by the time you retire. While she won't be financially dependent, consider any potential future support you might want to provide for her education or marriage.
• Healthcare costs: Healthcare expenses tend to increase with age. Factor in potential medical needs during retirement.
• Debt: If you have any outstanding debt by the time you retire, you'll need to account for its repayment in your corpus calculation.
• Investment returns: The corpus amount assumes a certain rate of return on your investments. Research different investment options and their potential returns to refine your calculations.

Recommendation:

Consult a financial advisor for a personalised retirement plan considering your specific financial situation, risk tolerance, and investment goals. They can help you create a more comprehensive plan and suggest suitable investment strategies to achieve your corpus target.

Remember, this is an estimate. Regularly review your plan and adjust it based on changing circumstances.

...Read more

Mayank

Mayank Chandel  |1003 Answers  |Ask -

IIT-JEE, NEET-UG, SAT, CLAT, CA, CS Exam Expert - Answered on Jun 24, 2024

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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