Should a 79-Year-Old with Substantial Savings Close PPF and Reverse Mortgage?

Ans: Shri, your current financial structure is quite robust. The take-home salary of Rs. 1.13 lakh is well-allocated towards savings and investments. Your monthly investment strategy, especially with SIPs and contributions to NPS, is commendable. You’ve done well to diversify your investments across different asset classes like PPF, stocks, mutual funds, NPS, and EPF.

Evaluating Your PPF and NPS Contributions
The PPF account maturity in March 2025 provides a good opportunity to reassess its role in your portfolio. The current PPF valuation of Rs. 21.04 lakhs (including your spouse’s account) is a safe and low-risk investment. However, with your goal of achieving a Rs. 5 crore corpus, the returns from PPF might not suffice.

Your NPS contributions are beneficial due to the tax benefits under Section 80CCD(1B). However, it’s important to remember that NPS has a long lock-in period until retirement. This could limit your flexibility.

Instead of withdrawing from PPF to invest in mutual funds, you can continue the PPF until maturity and then assess the need based on market conditions. As PPF provides a fixed and risk-free return, it’s wise to balance it with other growth-oriented investments.

SIP Strategy
Your current SIPs in small and mid-cap funds are aligned with higher risk and higher return strategies. Small and mid-cap funds can offer significant growth over the long term but are also more volatile.

As you plan to increase your SIP contributions annually, consider adding some large-cap or balanced funds to your portfolio. These funds provide stability and can cushion your portfolio during market downturns.

Given the one-year duration of your current SIPs, it's essential to regularly review their performance. Consistently monitor the funds, but avoid frequent changes unless there’s a significant underperformance.

Instead of withdrawing from mutual funds for monthly expenses, consider building an emergency fund. You can invest this fund in low-risk instruments that are easily accessible.

Assessing Your Retirement Goal
Your target of achieving a Rs. 5 crore corpus at retirement is ambitious but achievable with disciplined investing. Given the current investment structure, it's feasible to get close to this target. However, it would be wise to regularly reassess your goals and make necessary adjustments to your SIP contributions.

If you maintain and gradually increase your current investment strategy, you’re on the right path. Focus on ensuring that your portfolio remains diversified across different asset classes.

Planning for Daughter's Education
Your plan to fund your daughter’s engineering education through mutual fund redemptions is practical. Given the short timeframe, it's advisable to invest the amount earmarked for her education in safer instruments. You can consider shifting some of the mutual funds into debt funds or liquid funds as the education expenses near.
Real Estate Consideration
While you plan to purchase a 2BHK flat after your daughter’s education, it's essential to evaluate the impact on your overall financial goals. The cost of Rs. 2.5-2.6 crore is significant. It’s crucial to assess whether this investment will impact your retirement corpus goal.

Since you currently stay in your own 1BHK flat, consider whether upgrading to a 2BHK is essential or if the funds could be better used towards your retirement savings.

Insurance and Risk Management
Currently, you lack life insurance, which is a critical aspect, especially as the sole breadwinner with dependents. I strongly recommend getting a term life insurance policy to cover at least 10-15 times your annual income. This will ensure financial security for your family in case of unforeseen circumstances.

Also, evaluate the adequacy of your current Mediclaim policy. Ensure that the sum insured covers potential healthcare costs adequately, considering inflation in medical expenses.

Action Plan to Achieve Financial Goals
Continue and Review SIPs: Continue with your SIPs, but ensure diversification. Add large-cap or balanced funds for stability. Regularly review the performance but avoid frequent changes unless necessary.

Insurance Coverage: Secure adequate life insurance and ensure your health insurance covers inflation-adjusted medical costs.

Retain PPF until Maturity: Let the PPF mature in 2025, then reassess its role in your portfolio. Don’t withdraw now; it offers a risk-free return.

Emergency Fund: Build an emergency fund in liquid or debt instruments instead of relying on mutual funds for monthly expenses.

Real Estate Decision: Reevaluate the need to upgrade to a 2BHK flat. Assess its impact on your retirement goals.

Education Planning: For your daughter’s education, start shifting the required amount into safer instruments like debt funds as the time nears.

Final Insights
Shri, your financial foundation is solid. With the right adjustments and a disciplined approach, you’re well on your way to achieving your financial goals. It’s crucial to regularly reassess your investments and ensure you have the right insurance coverage in place. Continue with your current strategy, but ensure diversification and risk management are prioritized.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You are 39 years old, working with a multinational company. Your take-home income is Rs. 1.4 lakh per month. You are asking two questions:

Should I close my home loan using my matured PPF?

Are my investments on the right track?

Let us evaluate both in a detailed and professional manner. We will look at your finances from a full 360-degree view to help you take better decisions.

Present Financial Snapshot
Let us understand your current assets and liabilities first:

Take-home salary: Rs. 1.4 lakh per month

Home loan outstanding: Rs. 20 lakh (9 years completed)

Monthly EMI (assumed): Not mentioned, but likely Rs. 20,000–25,000

Monthly expenses: Rs. 30,000

Health insurance premium: Rs. 21,000 per year

Term insurance premium: Rs. 40,000 per year

SIP: Rs. 12,000 per month

ULIP: Rs. 25,000 per year (started in 2022 for 20 years)

PPF: Rs. 15 lakh (matured)

Mutual funds: Rs. 30 lakh

ESOPs: Rs. 30 lakh

Let us now analyse both your questions step by step.

Should You Close Home Loan Using PPF?
You have completed 9 years of a housing loan.

Only Rs. 20 lakh is left as balance.

PPF has matured and holds Rs. 15 lakh.

Your PPF is a safe and tax-free investment.

You should not use the full amount to close your home loan.

Here is why: Home loan gives tax benefits on both interest and principal.

It also helps you build your credit history.

Your EMI seems comfortable at Rs. 20,000 to Rs. 25,000.

Your net monthly surplus is very good after expenses and SIP.

Do partial prepayment of home loan only.

Use Rs. 5 lakh from PPF to reduce your loan balance.

This reduces your interest burden.

Keep Rs. 10 lakh in PPF for safety and emergencies.

Don’t close full loan now.

If you reduce loan tenure (not EMI), it saves more interest.

This way, you reduce interest and still keep benefits.

Don't touch the rest of PPF.

It can also act as emergency fund in job break, health issue or family need.

Full closure of home loan is not necessary if EMI is manageable.

Should You Continue or Surrender the ULIP?
You are paying Rs. 25,000 per year in a ULIP since 2022.

ULIPs mix insurance and investment in one product.

In the first few years, most of your money goes in charges.

They are very costly, and the returns are unpredictable.

You already have term insurance for pure protection.

ULIP is not needed.

You can surrender this policy immediately.

Reinvest the amount in mutual funds through SIP or STP.

This way, you get better returns with lower costs.

ULIP does not offer flexibility or goal matching.

Mutual funds give transparent performance tracking.

Avoid mixing insurance with investments in future.

Is Your Investment Strategy on the Right Path?
Let’s analyse your current investment portfolio from all sides.

1. Mutual Funds – Rs. 30 lakh

This is a strong amount for your age.

You are running a SIP of Rs. 12,000 monthly.

This shows discipline and long-term thinking.

Try to increase SIP yearly with salary hike.

Aim for Rs. 20,000 to Rs. 25,000 SIP monthly in next 2 years.

Invest in actively managed funds, not index funds.

Index funds only copy the market and don’t give extra return.

Active funds have fund managers to help beat inflation.

Also, avoid direct plan funds if used.

They may look cheaper, but offer zero guidance or review.

Use regular plan via Certified Financial Planner (CFP).

This gives ongoing support, rebalancing, and handholding.

Review your MF portfolio once in 6 months.

Keep mix of large cap, flexi cap and mid cap funds.

Avoid small cap if your goals are short term.

Long-term goals should drive your MF selection.

Keep 1 goal for each MF. Example: Retirement, freedom, child, etc.

This brings clarity and emotional discipline.

2. ESOPs – Rs. 30 lakh

ESOPs can create sudden wealth but are high risk.

They are linked to one company, your employer.

This is called “double risk”.

If your job and stock both go down, you face double pain.

Keep ESOPs within 20% of your total portfolio.

You already have Rs. 30 lakh in ESOP, and Rs. 30 lakh in MFs.

That’s a 50-50 split now.

Start selling some ESOP every year.

Move the money into mutual funds or debt funds.

This reduces risk and adds diversity.

Also, check tax rules before selling ESOPs.

Avoid waiting for maximum price or market timing.

Take money out slowly over 2–3 years.

Don't link your wealth to one company stock.

3. PPF – Rs. 15 lakh (matured)

You have done very well by holding PPF till maturity.

PPF is one of the best low-risk options in India.

Use only part of it for loan prepayment.

Keep balance for emergencies or future needs.

You can also open a new PPF again.

This helps save tax under Section 80C.

Use PPF as a safety cushion, not for aggressive growth.

4. SIP – Rs. 12,000 monthly

SIP is a good habit for wealth creation.

Increase it step by step every year.

Add Rs. 2,000–3,000 more every 6 months.

Your current income allows higher SIP.

But maintain balance between investing, EMI, insurance and life needs.

Insurance Coverage Assessment
1. Health Insurance

You are paying Rs. 21,000 per year.

Check if the cover is at least Rs. 25 lakh floater.

If not, take a super top-up plan.

Health expenses are rising faster than income.

Good insurance protects your savings and wealth.

2. Term Insurance

You are paying Rs. 40,000 yearly.

Ensure cover is 15 to 20 times your annual income.

Your income is Rs. 16.8 lakh yearly (1.4 lakh x 12).

So, term cover should be at least Rs. 3 crore.

If current cover is lower, take an extra policy.

Term plans are cheap and pure protection.

Don't delay increasing your coverage.

Suggestions for Future Financial Growth
Track your net worth every 6 months.

Maintain a monthly budget sheet to manage expenses.

Avoid luxury spending from bonuses or incentives.

Don’t buy any new real estate for investment.

Real estate locks money and gives poor flexibility.

Avoid F&O, crypto, or stock tips from social media.

These look exciting but destroy wealth silently.

Stick to your own goals and asset allocation.

Write your goals on paper – with amount and time.

Example: Rs. 2 crore for retirement by age 55, Rs. 40 lakh for child.

Link each investment to one goal.

This gives emotional connection and purpose.

Stay patient during market ups and downs.

Don’t stop SIPs during market fall. That’s when you get more value.

Meet a Certified Financial Planner every year to review.

Life changes. So should your plan.

Finally
Do not close your entire home loan using PPF.

Do partial prepayment with Rs. 5 lakh only.

Keep Rs. 10 lakh from PPF as emergency buffer.

Surrender your ULIP and shift to mutual funds.

Increase SIP step by step.

Reduce ESOP exposure to avoid risk.

Review term and health insurance coverage immediately.

Maintain goal-based investing using active mutual funds.

Avoid direct and index funds.

Keep meeting Certified Financial Planner every year.

This builds financial freedom, not just wealth.

You are already on a strong path. Just refine it smartly.

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