How much should a retired couple with Rs 1 lakh monthly pension save?

Ans: It's evident that you and your wife are diligently managing your finances and planning for the future, which is commendable. Let's review your financial situation and address your concerns.

You both have stable incomes, prudent savings, and investments across various avenues. However, it's crucial to ensure that your liabilities are manageable and aligned with your long-term financial goals.

With a car loan nearing completion and a home loan with an extended tenure, it's wise to consider reallocating the EMI amount towards additional investments once these liabilities are cleared. This proactive approach will enhance your investment corpus over time.

Your existing investments in MFs, EPF, and NPS provide a solid foundation for your financial future. By adding extra investments post-car loan repayment, you're further strengthening your financial portfolio.

Considering your children's education expenses and retirement planning, it's essential to continue increasing your investments gradually. Your current savings rate seems adequate, but adding the planned 12k monthly post-car loan can significantly boost your investment corpus.

Regarding insurance, having 1 crore term insurance each is a prudent move to safeguard your family's financial well-being in case of unforeseen events. However, considering inflation and increasing financial responsibilities, periodically reviewing your insurance coverage may be beneficial.

As for managing post-retirement expenses, projecting your retirement needs based on your current lifestyle and inflation is crucial. While your savings and investments are on the right track, consulting with a Certified Financial Planner can provide personalized insights and strategies to optimize your financial plan.

Overall, you're managing your finances prudently, balancing your liabilities with investments and adequately safeguarding your family's future. By staying disciplined in your savings and investments and periodically reassessing your financial plan, you're well-positioned to achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your current investments are well-diversified across various instruments. These include mutual funds (MF), Public Provident Fund (PPF), National Pension System (NPS), Fixed Deposits (FD), and National Savings Certificates (NSC). Additionally, you have significant investments in real estate through plots.

You and your wife both have substantial PPF and NPS investments, which is a good strategy for long-term savings and tax benefits. Your monthly expenses are Rs. 30,000, and you will need funds for your son's medical education from 2029 to 2034 and for your retirement.


Your diversified portfolio shows a good understanding of risk management. The regular contributions to NPS and PPF are commendable as they offer long-term benefits. Your investment discipline is evident from your systematic investment plans (SIPs) and regular savings.

Understanding Your Goals
Let's break down your financial goals into two primary categories:

Funding Your Son's Medical Education (2029-2034)

Retirement Planning

Funding Your Son's Medical Education
Your son's education is a short to medium-term goal. To meet this goal, you need to ensure liquidity and safety of principal.

Recommendations:

Continue Your SIPs: Keep your SIPs in mutual funds going. These will help accumulate a significant corpus over time.

Allocate a Separate Fund for Education: Consider creating a separate investment portfolio for your son's education. You could increase your SIP amount or start a new SIP specifically for this goal.

Invest in Debt Funds: Given the shorter time frame, consider debt mutual funds. They offer better returns than FDs and are more tax-efficient.

Recurring Deposits (RDs): RDs can also be considered for medium-term goals. They are safe and offer guaranteed returns.

Partial Withdrawal from PPF: Since your PPF accounts have substantial balances, you can consider partial withdrawals when required. PPF allows withdrawals after the 7th year.

Retirement Planning
Retirement planning is a long-term goal, and you need to ensure a steady income post-retirement.

Recommendations:

Increase SIP Contributions: If possible, increase your SIP contributions. Equity mutual funds are suitable for long-term goals due to their potential for higher returns.

Balanced Funds: Consider balanced or hybrid funds. These invest in both equity and debt instruments, providing a balance of growth and safety.

Review NPS Contributions: Your NPS contributions are excellent for retirement planning. Ensure that you and your wife continue contributing Rs. 5,000 monthly.

Systematic Withdrawal Plan (SWP): Post-retirement, use SWP from your mutual funds for regular income. SWPs provide a steady income stream and are tax-efficient.

Health Insurance: Ensure you have adequate health insurance. Medical emergencies can significantly impact your savings.

Evaluation of Current Investments
Mutual Funds (MF):

Your MF investments are Rs. 2,000,000 and Rs. 500,000 respectively. Continue these investments and consider increasing your SIPs if possible.
PPF:

Your PPF values are Rs. 1,500,000 and Rs. 2,100,000. PPF is an excellent long-term investment. Avoid withdrawing unless necessary.
NPS:

Both you and your wife have Rs. 500,000 in NPS with monthly contributions of Rs. 5,000. This is a good strategy for retirement savings.
FDs and NSCs:

FDs (Rs. 2,000,000 and Rs. 500,000) and NSCs (Rs. 1,000,000) are safe but offer lower returns. Consider shifting a portion to higher-yielding instruments like debt mutual funds or balanced funds.
Real Estate:

Your three plots valued at Rs. 1 crore are a significant investment. Real estate is illiquid, so avoid relying on it for immediate needs.

We understand the importance of securing your son's future and ensuring a comfortable retirement. Your careful planning and disciplined approach are commendable. Balancing current expenses, future education costs, and retirement savings can be challenging. However, with a structured approach, you can achieve your goals.

Adjusting Your Portfolio
Increase Equity Exposure:

For long-term goals like retirement, increasing equity exposure is advisable. Equity has the potential for higher returns, which can significantly enhance your retirement corpus.
Debt Allocation:

For your son's education, focus more on debt instruments to ensure safety and liquidity. Debt mutual funds, RDs, and PPF withdrawals can be effective.
Emergency Fund:

Maintain an emergency fund equal to 6-12 months of your monthly expenses. This fund should be in liquid instruments like savings accounts or liquid mutual funds.
Regular Review and Rebalancing
It's crucial to regularly review your portfolio and make necessary adjustments. Market conditions, interest rates, and personal circumstances change over time. Regular reviews ensure that your investments remain aligned with your goals.

Rebalancing Strategy:

Review your asset allocation annually. If equity markets perform well, your equity allocation may exceed your target. In such cases, consider shifting some funds to debt instruments.
Avoiding Common Pitfalls
Avoid Over-Reliance on Fixed Deposits:

While FDs are safe, their returns are often lower than inflation. Over-reliance on FDs can erode your purchasing power over time.
Diversify Within Mutual Funds:

Don't concentrate all your mutual fund investments in one category. Diversify across large-cap, mid-cap, and multi-cap funds.
Avoid High-Cost Insurance Products:

Avoid insurance products with high premiums and low returns. Focus on pure term insurance for adequate coverage and invest the rest in mutual funds.
Tax Planning
Effective tax planning can enhance your returns. Utilize all available tax-saving instruments.

PPF and NPS:

Both PPF and NPS provide tax benefits under Section 80C and Section 80CCD respectively. Maximize these contributions for tax savings.
Mutual Funds:

Equity mutual funds held for more than one year qualify for long-term capital gains tax at 10% for gains exceeding Rs. 1 lakh.
Health Insurance:

Premiums paid for health insurance qualify for deductions under Section 80D.
Final Insights
Your disciplined approach to savings and investments is praiseworthy. By fine-tuning your portfolio and aligning it with your goals, you can ensure financial security for your family. Focus on increasing your equity exposure for long-term goals and maintaining liquidity for short-term needs. Regular reviews and rebalancing will keep your investments on track.

Planning for your son's education and your retirement simultaneously is challenging but achievable with a structured plan. Continue your disciplined investment approach, and you will be well-prepared for both.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Comprehensive Financial Plan for Retirement and Child's Education
Understanding Your Current Financial Situation
You are 37 years old, and your wife is 33. Together, you have a monthly income of Rs 4 lakh. You have a housing loan of Rs 1.8 crore, mutual funds worth Rs 10 lakh, a PPF of Rs 12 lakh, and life insurance cover of Rs 20 lakh. Annually, you invest Rs 1 lakh in mutual funds, LIC, and insurance. You have a five-year-old daughter and plan to retire at 55 with a net worth of Rs 10 crore and Rs 1.5 crore for your daughter's education.

Setting Clear Financial Goals
Retirement Goal
You aim to retire at 55 with a net worth of Rs 10 crore. Considering an inflation rate of 6%, this corpus should be sufficient to support a comfortable lifestyle post-retirement.

Child's Education Goal
You need Rs 1.5 crore for your daughter's higher education. With education costs rising, starting early ensures you achieve this goal without financial strain.

Evaluating Current Investments
Mutual Funds
Your mutual fund portfolio is Rs 10 lakh, with an annual investment of Rs 1 lakh. Mutual funds are crucial for long-term growth due to their compounding benefits.

Public Provident Fund (PPF)
Your PPF balance is Rs 12 lakh. PPF offers safe, tax-free returns and should continue to be part of your portfolio.

Life Insurance
Your life insurance cover is Rs 20 lakh. Ensure this is adequate to cover any unforeseen events. Term insurance may provide higher coverage at lower premiums.

Analyzing Your Housing Loan
You have a substantial housing loan of Rs 1.8 crore. This loan represents a significant financial commitment. Ensure you manage this loan efficiently to avoid financial strain.

Current loan: Rs 1.8 crore
EMI: Calculate based on the interest rate and tenure to manage monthly cash flow effectively.
Enhancing Your Investment Strategy
Increasing Mutual Fund Investments
Mutual funds should form a significant part of your investment strategy due to their potential for high returns. Increase your annual SIP investments to Rs 5 lakh to build a substantial corpus.

Diversified Portfolio
Equity Mutual Funds: High growth potential; allocate 60% of your mutual fund investments here.
Debt Mutual Funds: Lower risk; allocate 20% for stability.
Hybrid Funds: Combine equity and debt; allocate 20% for balanced growth.
Systematic Investment Plans (SIPs)
Increase your SIPs to ensure a disciplined investment approach. A monthly SIP of Rs 40,000 can grow substantially over time.

Calculating Future Value of SIPs
Assuming a 12% annual return, a monthly SIP of Rs 40,000 over 18 years can accumulate a significant amount. Use an SIP calculator for precise future value calculations.

Disadvantages of Index Funds and Direct Funds
Index funds replicate market performance and may lack the potential for higher returns offered by actively managed funds. Direct funds require significant knowledge and time, which may not be suitable for everyone. Investing through a mutual fund distributor ensures professional management.

Utilizing Tax Benefits
Tax-saving Investments
Maximize contributions to tax-saving instruments like PPF, ELSS funds, and NPS. These provide tax deductions under Section 80C and additional benefits under Section 80CCD for NPS.

Efficient Tax Management
Review your investments for tax efficiency. Long-term capital gains on equities are taxed at 10% beyond Rs 1 lakh. Mutual funds provide tax-efficient growth compared to traditional savings.

Insurance Coverage
Adequate Life Insurance
Ensure you have adequate life insurance coverage. A term insurance plan provides high coverage at a low premium, securing your family's financial future.

Comprehensive Health Insurance
With a family of three, having comprehensive health insurance is crucial. Ensure your policy covers all family members and has a high sum insured to protect your savings from medical emergencies.

Planning for Child's Education
Child Education Fund
Start a dedicated education fund for your daughter. Invest in child-specific mutual funds or education plans that offer long-term growth. Starting early ensures a substantial corpus for her higher education.

Emergency Fund
Building a Safety Net
Maintain an emergency fund covering at least six months of expenses. This fund protects against unexpected financial challenges. Consider keeping this amount in a high-yield savings account or liquid mutual funds for easy access.

Managing Your Housing Loan
Efficient Loan Repayment
Consider prepaying your housing loan when possible to reduce the interest burden. Evaluate if refinancing options offer lower interest rates, helping manage EMIs effectively.

Retirement Planning
Creating a Retirement Account
Consider opening a retirement-specific account like the National Pension System (NPS). NPS offers tax benefits and helps build a retirement corpus with professional management. Invest regularly in this account for long-term growth.

Pension Plans
Explore pension plans that provide regular income post-retirement. These plans ensure a steady flow of income and financial security during retirement.

Building a Sustainable Retirement Corpus
Calculating Future Value
Using the earlier example, let’s calculate the future value of your current investments.

PPF: Rs 12 lakh + annual investments for 18 years at 7% = significant growth
Mutual Funds: Rs 10 lakh + Rs 40,000 monthly SIP for 18 years at 12% = substantial corpus
Equity Shares: Assuming 10% annual growth
Total estimated corpus needs to be regularly reviewed and adjusted based on market conditions and personal circumstances.

Regular Review and Rebalancing
Regularly review your investment portfolio. Market conditions and personal circumstances change over time. Rebalancing ensures your portfolio stays aligned with your goals.

Professional Guidance
Consult a Certified Financial Planner (CFP) for personalized advice. A CFP can help create a comprehensive financial plan tailored to your goals. They offer professional insights and strategies to achieve your retirement and education objectives.

Final Insights
Achieving your retirement goal of Rs 10 crore and Rs 1.5 crore for your daughter's education requires disciplined saving and investing. Regularly review and adjust your financial plan. Focus on long-term growth and tax efficiency. With careful planning, you can retire at 55 with financial security and peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hi,
Broadly, your expenses look on the higher side which is not helping your investments which is low at 25k per month. We advise to streamline your expenses to bring them down while simultaneously increasing the monthly investments. We think that 50k per month should be the base and you can strive to improve upon this on a Yearly basis
Best Regards,
Anil Rego,
Founder & CEO,
Right Horizons