Home > Money > Question
Need Expert Advice?Our Gurus Can Help

Grandfather Seeking Financial Advice for Granddaughter's Future

Ramalingam

Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 10, 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
Vaman Question by Vaman on Aug 01, 2023Hindi
Money

Sir, I am 78 years old retired chemist. I and my Mrs. live with my only daughter looking after my granddaughter. Main aim in my life is to make secure future of my granddaughter financially.As I and my wife live with my son in law I have no expenses. Since they are doing extremely well in life financially they do not accept any financial help. So I want to invest in my granddaughter's name. My individual finances:: 1)15 lakhs in F.D.an average 8 percent rate of interest. 2) 20lakhs rs. in ppf 3)15 lakhs in PMVYYOJANAat 8./' intrest. 4)20 lakhs worth. InM.F.ason31/07/23 5) I earn ten thousand rupees by renting my house. 6)15000 rs PM by partime job. 7) I have ancestral property worth one and half corore.(Iam planning to take aloan of on my property under the scheme of reverse mortgage scheme for senior citizens by way of an over draft. I expect toget about one corore. For this amount iam planning to make a trust in the name of my family. Expect you to suggest me some guidelines.) 8) 100000rs inshres of Indian Bank, Karnataka Bank Bank of Maharashtra, Power grid corporation,yes bank 9) 50000 rupees in government gold bond maturity date 25/03/2025 10 )3lakhs in my S.B at any time for emergency.plus500000rs.insenior citizens scheme. 11)20 lakhs worth physical gold 12)50 lakhs worth of my wife 13)5 lakhs worth miscellaneous movable goods 14)5lakhs each of healthcare insurance for both husband and wife. My aim: 1) Make secure my granddaughter's future in my own way.Following is the way I plan to do it. 1) Investment of 150000per year since 2017 by her mother. 2) Investing of Rs.150000 per year from 2023 in PPFby me. 3) Lumpsum amount invested in her name in following MF a)UTI FLEXI CAP FUND 2o20 -1000units b)UTI focused equity fund 2021-1800 units c) Fixed deposit in UNITY SMALL BANK RS 150000 LAKHS. NEW INVESTMENT Plan to start SIP worth one lakh twenty thousand rupees that's ten thousand rupees per month as follows: 1) Multi asset fund 2500rs pm(Icici or Aditya Birla Sun Life or Hdfc ) 2) UTI flexicap fund 2500 rs PM I expect you to suggest four SIP FUNDS ----+-----++++++ I have given you all the details of my financial status. I plan to continue Investing in my PPFa/c at the rate of 150000rs As time is running out for me your suggestions will help me in better management of my finances. Waiting eagerly for your reply Yours sincerely V.G. Nadig Note : Do you want details of Mutual Fund companies. I have nearly 25 funds.

Ans: You have worked hard and built a solid financial base. Now, your goal is to secure your granddaughter’s future. This is a noble and thoughtful aim. Your financial portfolio is already diversified. However, there are a few key areas where you can make adjustments to further reduce risk, improve returns, and ensure long-term stability for your granddaughter.

Here’s a 360-degree solution to help you better manage your finances and achieve your goals.

Your Existing Investments

Fixed Deposits (FDs): Rs. 15 lakhs earning an average of 8% interest is a stable investment. FDs are risk-free but offer lower returns over time when compared to other investment options. Inflation could erode the value of this amount in the long term.

Public Provident Fund (PPF): Rs. 20 lakhs in PPF is an excellent investment, offering tax-free interest. It also provides good security. It’s wise to continue investing Rs. 1.5 lakhs annually here as it will help create a substantial, risk-free corpus for the future.

Pradhan Mantri Vaya Vandana Yojana (PMVVY): Rs. 15 lakhs at an 8% interest rate in this scheme is a good choice for senior citizens like you. It provides regular income while being low-risk.

Mutual Funds: Rs. 20 lakhs in mutual funds is a good way to participate in market growth. These funds could offer higher returns over the long term, but they also carry more risk than FDs or PPF.

Physical Gold: Rs. 20 lakhs worth of gold is a solid hedge against inflation. However, gold alone won’t generate income or high returns. While it provides stability, too much gold can limit your portfolio’s growth potential.

Income Sources and Part-Time Job

You have Rs. 10,000 monthly rental income and Rs. 15,000 from your part-time job. This helps create a comfortable situation for your day-to-day needs. Since you live with your family and have no major expenses, it’s great that you can focus on investing for your granddaughter's future.

Reverse Mortgage Loan on Ancestral Property

Your plan to take a reverse mortgage loan is a good way to unlock the value of your ancestral property. You expect to get around Rs. 1 crore, and you are considering setting up a family trust. This is an excellent idea for securing your family’s financial future.

The reverse mortgage will provide you with funds while you continue to live in the house. You can use these funds to invest in your granddaughter’s name or create a long-term income stream.

Your Stock Portfolio

Shares: Rs. 1 lakh in stocks such as Indian Bank, Karnataka Bank, and Power Grid Corporation is a nice addition to your portfolio. However, individual stocks carry higher risk, especially if they are concentrated in one sector. Since you already have a decent exposure to mutual funds, you may consider reducing the risk in this area by reviewing the performance of these stocks periodically.
Gold Bonds and Senior Citizen Schemes

Gold Bonds: Rs. 50,000 in government gold bonds is another smart choice as it’s safer than holding physical gold. These bonds also offer some interest income and are free from the hassle of storage.

Senior Citizen Savings Scheme (SCSS): Rs. 5 lakhs in SCSS is an excellent low-risk option that provides a steady income. It’s advisable to continue holding this.

Health Insurance

Both you and your wife have Rs. 5 lakhs each in health insurance. This is a critical part of financial planning. At your age, medical expenses could be a significant burden. Having adequate health cover ensures that your savings won’t be affected by any unexpected medical costs.

Your Financial Goals for Granddaughter

You’re already doing a fantastic job with the investments you’ve made for your granddaughter. However, let’s look at how you can optimize this further.

PPF Contributions: You plan to invest Rs. 1.5 lakhs per year in her PPF account. This is an excellent idea. PPF is safe and offers tax benefits. Continue with this plan.

Mutual Fund Investments: You’ve already invested in funds like UTI Flexicap and UTI Focused Equity Fund. Both funds are actively managed and have the potential for growth over the long term. Actively managed funds tend to outperform index funds, as they adapt to market changes. Keep reviewing the performance of these funds every year with the help of a Certified Financial Planner (CFP).

New SIP Plan for Granddaughter

You have planned to start a Systematic Investment Plan (SIP) of Rs. 1.2 lakhs annually (Rs. 10,000 per month). This is a smart move, and it’s crucial to choose the right funds to build wealth for your granddaughter. I suggest focusing on the following types of funds:

Multi-Asset Fund: These funds invest in a mix of equity, debt, and gold. This diversification reduces risk while providing potential for growth. A multi-asset fund would be a great fit for your granddaughter’s long-term needs.

Flexi Cap Fund: This fund can invest across market capitalizations, offering both stability and growth potential. Since it’s actively managed, it will aim to maximize returns by adjusting to market conditions.

Aggressive Hybrid Fund: This fund balances equity and debt, providing both growth and safety. It’s ideal for wealth creation over the long term.

Trust and Estate Planning

You are planning to set up a family trust with the proceeds from the reverse mortgage. This is an excellent way to manage and protect your assets for the benefit of your family and your granddaughter. The trust will help ensure that the funds are used according to your wishes.

When setting up a trust, make sure to:

Define clear goals for the trust, such as education, marriage, or other specific needs for your granddaughter.

Appoint a reliable trustee, either a family member or a professional, to manage the trust.

Ensure that the trust is legally compliant and tax-efficient.

Considerations for Your Investment Portfolio

Risk Management: Since you are 78 years old, it’s essential to maintain a balanced portfolio. Too much exposure to equities could be risky. A mix of equity (mutual funds) and fixed income (PPF, FD, SCSS) would be ideal for reducing risk.

Review of Mutual Funds: With 25 mutual funds, there might be overlaps in your portfolio. A concentrated portfolio of a few well-performing funds is often better than spreading investments too thinly. It’s a good idea to consolidate your mutual funds into 4-5 top performers. Regularly reviewing them with a Certified Financial Planner will help optimize your returns.

Liquidity: You have Rs. 3 lakhs in your savings account for emergencies. This is a good strategy. Maintaining liquidity ensures that you can handle unforeseen expenses without disturbing long-term investments.

Tax Efficiency

Keep in mind the tax benefits available under sections like 80C for PPF and health insurance. Since you have multiple income sources (FD interest, rental income, part-time job), tax planning is crucial. Reducing your tax liability can help maximize your investments. A Certified Financial Planner can guide you on tax-saving strategies.

Final Insights

You are in a solid financial position, with diverse investments and a clear goal to secure your granddaughter’s future. Here are some key points to consider moving forward:

Continue your PPF contributions and mutual fund SIPs in her name.

Focus on multi-asset and flexi cap funds to balance growth and risk.

Review and consolidate your mutual funds to avoid overlaps.

Ensure your family trust is set up with clear goals and legal backing.

Regularly review your portfolio to ensure it aligns with your goals.

Your granddaughter’s future is already well on its way to being secure, thanks to your thoughtful planning and wise investments.

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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

Asked by Anonymous - Dec 18, 2023Hindi
Listen
Money
I have two daughters and their age is 16 and 15 and i own 50 lakhs bank FD , 9 lakhs invested in MF me and my wife have invest 60 lakhs in share market and my age 51 year old. Can you plz suggest the best option for investment . for my future education of two kids and my and my wife upcoming old age( My family ) i have 3 lakhs mediclaim and have few LIC policies. I request you to give me the best advice or suggest the best investment for my growth of money and as a monthly income ( Home expenses ) plz reply
Ans: Given your family's financial situation and goals, it's crucial to create a comprehensive investment plan that considers both growth and stability. Here's a suggested approach:

Education Fund for Daughters: Since your daughters are nearing college age, consider setting aside a portion of your investments specifically for their education expenses. You may allocate a portion of your bank FDs and MF investments towards this goal, ensuring it grows over time to meet their educational needs.
Retirement Planning: As you and your wife approach retirement, it's essential to prioritize building a sufficient corpus to support your lifestyle in old age. Consider diversifying your investment portfolio to include a mix of equity, debt, and balanced funds, along with retirement-focused instruments like the National Pension System (NPS) or Senior Citizen Savings Scheme (SCSS).
Health and Insurance: Ensure you have adequate health insurance coverage for your family's medical needs. Additionally, review your existing LIC policies to ensure they align with your current financial goals and provide adequate coverage for your family's future needs.
Monthly Income: To generate regular income for your household expenses during retirement, consider investing in dividend-paying stocks, mutual funds with dividend options, or fixed income instruments like Senior Citizen Savings Scheme (SCSS) or Post Office Monthly Income Scheme (POMIS).
Regular Review and Adjustment: Regularly review your investment portfolio to track its performance, make necessary adjustments, and ensure it remains aligned with your financial goals and risk tolerance.
Consulting with a Certified Financial Planner can provide personalized guidance tailored to your family's specific financial situation and goals. Together, you can create a customized investment plan that addresses your needs for growth, income, and financial security.

..Read more

Ramalingam

Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 03, 2024

Listen
Money
Dear Sir, I am 44 yrs old with wife and 2 kids of age 9&11.I have been investing my money into the following sectors over the last few years back. 1.LIC and SBI money back policies of 8.5L and will be mature in 2034. 2.Life cover for self of 50L has to pay till 2047 annually of 20K. 3.Max life ULIP plan SA 6L mature in 2031. 4.Family floater Health I surance of 5L 4.HDFC life click 2I combo plan invest of 9L 5.SSA till date for both children 1L each 5.SIP of 20K since last 4.5yrs monthly 6.SIP lumpsum of 1L invested in Axis medium cap fund invested 4yrs back My question is to secure my child education and retirement life after 55 yrs , corpus should be 2 Crore what else I have to do
Ans: It's commendable that you've been diligently planning for your family's future. Your commitment to securing your children's education and ensuring a comfortable retirement is truly admirable.

Considering your current investments, it's essential to evaluate if they align with your long-term goals. While your existing plans offer some protection and potential growth, diversifying your portfolio could provide added stability and growth potential. Have you explored avenues beyond traditional insurance policies and mutual funds?

Certified Financial Planners can offer personalized strategies tailored to your aspirations and risk tolerance. They can suggest options that balance growth potential with risk mitigation, guiding you towards achieving your desired corpus. Have you considered consulting one to fine-tune your financial roadmap?

Remember, the journey to financial security is not just about numbers—it's about ensuring peace of mind and enabling your loved ones to pursue their dreams. By proactively seeking guidance and exploring diverse investment avenues, you're laying a robust foundation for a fulfilling future. Keep nurturing your financial garden, and the seeds you sow today will bloom into a prosperous tomorrow.

..Read more

Ramalingam

Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 01, 2024

Asked by Anonymous - Jul 01, 2024Hindi
Money
Hi Sir, myself Pavani. My age is 34 years, I have a daughter who is 2 year old. My monthly salary is 50000. We don't have any property. I have 10 lac FD, I have insurance sum assured worth of 5 lac which will meture in 6 years . MF 1 lac, SSY account for my daughter have opened till now have 1 lac in that. Have opened Pradhan mantri pension scheme for my retirement planning. SIP 5k investing from past 10 months. I want to secure my and my daughter's future. Kindly suggest.
Ans: First, congratulations on your efforts to plan for your and your daughter's future! At 34, you have a steady monthly salary of Rs. 50,000 and a variety of existing investments. You have a 10 lakh FD, a 5 lakh insurance policy maturing in 6 years, 1 lakh in mutual funds, 1 lakh in a Sukanya Samriddhi Yojana (SSY) account for your daughter, and you're investing Rs. 5,000 per month in a SIP. Additionally, you’ve opened a Pradhan Mantri pension scheme for your retirement planning. Let’s build on this solid foundation to achieve your financial goals.

Setting Clear Financial Goals
Establishing clear financial goals is crucial. Your primary goals may include:

Securing your daughter’s education.
Building a substantial retirement corpus.
Ensuring adequate insurance coverage.
Creating an emergency fund.
By focusing on these goals, we can create a comprehensive investment strategy.

Creating a Diversified Investment Plan
Emergency Fund
An emergency fund is essential for financial security. It should cover 6-12 months of your monthly expenses. With a monthly expense of Rs. 50,000, aim for an emergency fund of Rs. 3-6 lakh. Your 10 lakh FD can act as your emergency fund, but consider moving a portion to a high-yield savings account for better accessibility.

Insurance Coverage
Ensure you have adequate insurance coverage for both life and health. A sum assured of 5 lakh is insufficient. Consider term insurance with a higher sum assured, covering at least 10-15 times your annual income. This will provide financial security to your daughter in case of any unforeseen event. Additionally, ensure you have comprehensive health insurance for yourself and your daughter.

Investment in Mutual Funds
Equity Mutual Funds
Investing in equity mutual funds can provide high returns over the long term. Allocate a portion of your monthly SIP towards diversified equity funds. These funds are managed by professionals and have the potential for significant growth. Given your current SIP of Rs. 5,000, consider increasing it as your salary grows.

Debt Mutual Funds
Debt mutual funds are less risky and provide steady returns. They invest in fixed-income securities like bonds and government securities. Allocate a part of your investment to debt funds for stability and moderate growth.

Systematic Investment Plan (SIP)
Your current SIP of Rs. 5,000 per month is a great start. SIPs help in averaging out the cost of investments and benefit from the power of compounding. Here’s a suggested allocation:

Equity Funds: Rs. 3,000 per month
Debt Funds: Rs. 2,000 per month
As your income increases, aim to gradually raise your SIP contributions.

Sukanya Samriddhi Yojana (SSY)
The SSY account for your daughter is an excellent initiative. It provides attractive interest rates and tax benefits. Continue contributing to this account regularly. Aim to maximize the annual contribution limit of Rs. 1.5 lakh to benefit from the compounded interest over the years.

Pradhan Mantri Pension Scheme
The Pradhan Mantri Pension Scheme is a good start for retirement planning. However, it’s essential to diversify your retirement investments. Alongside the pension scheme, invest in mutual funds and PPF (Public Provident Fund) for a balanced retirement portfolio.

Benefits of Professional Guidance
Certified Financial Planner (CFP)
A Certified Financial Planner can help you navigate your financial journey. They offer personalized advice, considering your financial goals and risk tolerance. A CFP can help you select the right mutual funds, insurance policies, and other investment options.

Personalized Advice
CFPs provide tailored financial advice. They consider factors like your income, expenses, goals, and risk appetite. This ensures your investments align with your financial objectives.

Avoiding Common Pitfalls
High-Risk Investments
Avoid high-risk investments like direct equities or speculative ventures. These can offer high returns but come with significant risks. Stick to diversified mutual funds for balanced growth.

Index Funds
Index funds simply mimic market indices. While they have lower management fees, actively managed funds can provide higher returns. Professional fund managers can make strategic decisions to outperform the market.

Direct Mutual Funds
Direct mutual funds may seem attractive due to lower costs. However, investing through a CFP ensures professional guidance. This maximizes your returns and aligns your investments with your financial goals.

Long-Term Financial Planning
Projecting Future Needs
Estimate your future financial needs, including your daughter's education and your retirement expenses. Consider factors like inflation and lifestyle changes. This helps in setting clear targets for your savings and investments.

Regular Reviews
Regularly review your investment portfolio to ensure it stays on track. Market conditions change, and so should your investment strategy. Consult your CFP to make necessary adjustments based on performance and goals.

Reinvesting Matured Funds
When your insurance policy matures in 6 years, reinvest the Rs. 5 lakh in mutual funds. This will significantly boost your investment corpus. Choose a mix of equity, debt, and hybrid funds to balance risk and returns.

Benefits of Mutual Funds
Professional Management
Mutual funds are managed by professional fund managers. They have the expertise to select the best stocks and bonds, ensuring optimal returns. This professional management is crucial for maximizing your investments.

Diversification
Mutual funds offer diversification, spreading your investment across various assets. This reduces risk and ensures stability. A diversified portfolio is key to balanced growth and risk management.

Compounding Returns
Investing in mutual funds through SIPs leverages the power of compounding. The returns earned are reinvested, generating further returns. This significantly boosts your investment growth over time.

Financial Discipline
Budgeting
Create a monthly budget to track your income and expenses. This helps in identifying areas where you can cut costs and allocate more towards investments. Financial discipline is key to achieving your goals.

Avoiding Unnecessary Expenses
Limit unnecessary expenses and focus on essential spending. This ensures more funds are available for investments, accelerating your wealth creation and securing your and your daughter's future.

Emergency Fund
Maintain an emergency fund to cover unforeseen expenses. This prevents you from dipping into your investments. An emergency fund ensures financial stability and peace of mind.

Staying Informed
Regular Updates
Stay informed about your investments by regularly checking their performance. Use financial news, market analysis, and updates from your CFP to make informed decisions. Knowledge is power in managing your investments.

Continuous Learning
Educate yourself about different investment options and market trends. Continuous learning helps in making better investment choices and understanding the financial landscape.

Feedback from CFP
Regularly seek feedback from your CFP regarding your investment strategy. They can provide valuable insights and recommendations based on market conditions and your financial goals.

Final Insights
Securing your and your daughter's future is achievable with disciplined investing and financial planning. By diversifying your investments, leveraging SIPs, and seeking professional guidance, you can effectively grow your wealth and achieve your goals. Stay informed, maintain financial discipline, and regularly review your portfolio to ensure it aligns with your objectives. Investing in a mix of equity, debt, and hybrid mutual funds will provide a balanced approach, ensuring both growth and stability.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6999 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 14, 2024

Money
Hello, I'm a 46 year old , unable to work anymore, I have no loans, own house,wife is the earning member. My investments are : Running investments: Pension Plan with fund value of 42 lakhs(current fund value) till 2037, Equity Mutual fund with fund value of 12 lakhs( Current fund value). Yearly investment emi of 1.20 lakh Monthly expenditure of 25 k Monthly rental income of 8k NO PPF Bank Balance of 26 lakh. Want to invest 10 -15 lakh to earn a sizeable corpus ( say 1 cr) in next 18 years for my child when he will become an adult, in addition to a 50 k monthly income in next 2-3 years Can you kindly guide me as to what investments I should be doing to achieve this target
Ans: You have provided valuable details about your financial situation. Let’s analyse your current standing and future goals.

Age: 46 years old
Running Investments:
Pension Plan with a current fund value of Rs 42 lakhs (maturing in 2037).
Equity Mutual Fund with a current fund value of Rs 12 lakhs.
Income & Expenditure:
Monthly rental income of Rs 8,000.
Monthly expenditure of Rs 25,000.
Yearly EMI of Rs 1.2 lakh for ongoing investments.
Savings: Bank balance of Rs 26 lakhs.
Investment Goals:
You want to invest Rs 10-15 lakh to build a corpus of Rs 1 crore in 18 years for your child.
You also need a monthly income of Rs 50,000 in the next 2-3 years.
Given these goals, let’s discuss how you can achieve them.

Income Generation for Monthly Needs (Rs 50,000)
To achieve a monthly income of Rs 50,000 in the next 2-3 years, we need to explore investment options that can generate consistent returns.

Rental Income: You already have Rs 8,000 coming in monthly. This helps reduce your income requirement.

Systematic Withdrawal Plan (SWP):

A Systematic Withdrawal Plan from your mutual funds could be useful.
You can park part of your Rs 26 lakh bank balance into a debt-oriented hybrid mutual fund.
These funds provide stability with moderate returns.
You can withdraw monthly amounts through SWP to meet your requirement.
Based on the fund's performance, you can plan to withdraw around Rs 42,000 per month to reach your target of Rs 50,000 (including Rs 8,000 from rent).
This option allows you to use your capital effectively while keeping it invested for moderate growth.

Fixed Income Options:

You may also consider some amount in fixed deposits or high-interest-bearing savings instruments.
However, they are taxed as per your income tax slab, so this may reduce post-tax returns.
Combining these with SWP ensures liquidity and some level of fixed returns.
This way, your immediate income needs can be met, keeping your capital intact.

Investment Plan for Building Rs 1 Crore for Child's Future
You aim to build Rs 1 crore in 18 years for your child. The best way to achieve this is through equity-based investments, as they tend to offer the highest long-term growth.

Equity Mutual Funds:

For long-term goals like 18 years, equity mutual funds are the most suitable.
Your existing equity mutual funds of Rs 12 lakh can continue to grow.
You can also invest Rs 10-15 lakh from your bank balance into diversified equity funds.
Actively managed equity mutual funds generally perform better over a long period compared to passive index funds, which often lack flexibility in changing market conditions.
It’s crucial to focus on mid-cap and small-cap funds as they have higher growth potential over an 18-year period.
Regular vs Direct Funds:

You might have heard about direct mutual funds, which have lower fees.
However, direct plans require deep market understanding and regular monitoring.
Investing through a Certified Financial Planner (CFP) who works with an MFD can help you manage your portfolio professionally, ensuring that your investments are regularly rebalanced to match market changes.
Regular plans, managed by CFPs, provide professional guidance, making them a better choice for individuals who do not want the stress of tracking every detail.
SIP for Consistent Growth:

You can start a SIP (Systematic Investment Plan) of Rs 50,000 monthly.
This amount will steadily build wealth over 18 years.
By investing Rs 50,000 a month in a mix of large-cap, mid-cap, and small-cap funds, you stand a good chance of achieving your target of Rs 1 crore.
A professional MFD working with a CFP can help you select funds based on your risk profile and growth expectations.
Review of Existing Pension Plan
Your pension plan with a current fund value of Rs 42 lakhs is a significant part of your retirement portfolio.

Performance Review:
It is crucial to review the performance of this pension plan periodically.
Ensure that it continues to give reasonable returns, as you have 13 more years until it matures.
Often, these plans have high charges and lower returns compared to equity mutual funds. You should evaluate if it makes sense to continue with this investment or switch to something more productive.
If the returns are lower than expected, you may want to consider redirecting future premiums into better-performing mutual funds.
Tax Implications on Your Investments
Understanding tax liabilities is essential for maximising your returns.

Capital Gains Tax on Mutual Funds:

For equity mutual funds, LTCG (Long-Term Capital Gains) above Rs 1.25 lakh is taxed at 12.5%.
Short-Term Capital Gains (STCG) on equity mutual funds are taxed at 20%.
For debt mutual funds, LTCG and STCG are taxed according to your income tax slab.
You should consult with your CFP to ensure that your withdrawals and investments are done in the most tax-efficient manner.
Tax on Rental Income:

The Rs 8,000 monthly rental income is also taxable.
Ensure you factor this into your annual tax planning.
By optimising tax strategies, you can maximise your returns while keeping your liabilities low.

Contingency and Emergency Fund
While investing for long-term goals, don’t overlook short-term financial safety.

Emergency Fund:
Out of your Rs 26 lakh bank balance, set aside at least Rs 4-5 lakh as an emergency fund.
This will help you manage any unforeseen expenses without disturbing your investments.
Keep this amount in a liquid or short-term debt fund for easy access.
Health Insurance:
Since your wife is the sole earning member now, ensure that you have adequate health insurance coverage.
This will help safeguard your family’s finances in case of medical emergencies.
Revisit Your Financial Plan Regularly
It is essential to track your financial journey.

Review Performance:

Regularly review the performance of your mutual funds and pension plans.
Make adjustments based on market conditions and your changing life circumstances.
Stay on Track with Goals:

Ensure that you are consistently investing towards your Rs 1 crore goal.
Keep in touch with your CFP to monitor if you’re on track, and take corrective actions if required.
By actively managing your investments and reviewing your goals, you can ensure financial security for your family.

Finally
Your situation is unique, and your goals are achievable with a disciplined approach.

By combining equity mutual funds, SWPs, and systematic SIPs, you can grow your wealth and generate regular income. Balancing risk and return is essential to meet your child’s future needs and your immediate income requirements.

Keep your financial plan flexible, review it often, and stay committed to your goals.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Milind

Milind Vadjikar  |599 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 09, 2024

Asked by Anonymous - Nov 09, 2024Hindi
Listen
Prof Suvasish

Prof Suvasish Mukhopadhyay  |36 Answers  |Ask -

Career Counsellor - Answered on Nov 09, 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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x