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Transitioning Back to India: Financial Advice for a Young Family (₹4 Cr Savings, Inherited Property!)

Janak

Janak Patel  |37 Answers  |Ask -

MF, PF Expert - Answered on Feb 10, 2025

Janak Patel is a certified financial planner accredited by the Financial Planning Standards Board, India.
He is the CEO and founder of InfiniumWealth, a firm that specialises in designing goal-specific financial plans tailored to help clients achieve their life goals.
Janak holds an MBA degree in finance from the Welingkar Institute of Management Development and Research, Mumbai, and has over 15 years of experience in the field of personal finance. ... more
Asked by Anonymous - Feb 10, 2025Hindi
Money

Advice Needed: Transitioning Back to India & Financial Planning Hello, I’m currently in the process of transitioning back to India after spending the last 15 years abroad. My family includes my wife (early 30s) and our 1-year-old baby. We are staying with my parents for now but are planning to move into a larger, more comfortable residence, either by buying or renting. I’d love to hear some perspectives on my financial situation, as I’m trying to figure out the best course of action in this new chapter. Here’s a quick summary of where I stand: 1. Cash Savings: We’re consolidating assets from both India and abroad, and will have about ₹4 crore in liquid funds. 2. Retirement Savings: I have a PPF-equivalent account of around ₹70 lakhs, which I can only access at age 65. I’m hoping the modest returns from this will be sufficient for my retirement. 3. Inherited Assets: I’ve inherited ancestral properties valued around ₹30 crore. I’m not planning to liquidate these assets or touch them for at least the next 10 years. 4. Career: I work in IT and expect a salary of about ₹1.3 lakh per month (after tax) in India. My wife is in the early stages of her career, so we’re still deciding whether she will work here or possibly start her own small business. Given all of this, here’s where I’m at: * Investment options: I’m considering investing the ₹4 crore in commercial real estate to generate passive income. I’ve seen a couple of properties with rental guarantees of ₹1.5 lakh per month, with a 5% annual increase. * Housing preference: My family prefers to live in a gated community, so I’m not really inclined to invest in residential property for passive income. * Housing decision: Should I buy an apartment or villa now, betting on my career certainty here, or focus on creating more financial freedom first before making career moves in India? In my heart, I feel that achieving financial independence should be my first priority before diving into career opportunities or starting a business here. What would you do in my situation? I'd love to hear your thoughts or any advice you can offer!

Ans: Hi,

Welcome back to India and Congratulations on taking this big decision to move back to India.

Before I start my response to your queries, just want you to know we share a couple of things in common. I was abroad for a considerable time and returned back to India and I was also in the IT field at that time, before I moved ship to Personal Finance and Financial Planning. So I can relate to some of your concerns, queries and thought process in that regard.

This may be a bit long but hopefully its helpful.
Your current Financial summary -
Cash/Liquid funds - INR 4 Crores
PPF equivalent - INR 70 Lakhs available at age 65
Inherited properties - valued at INR 30 crores no plan to liquidate as of now
Salary/Income - INR 1.3 lakhs per month in hand

As a few critical data points are not mentioned but with few indicators in queries, I will make some assumptions for the same - Age 37 years, Location for housing/work - Metro/2nd tier city.

Lets get a couple of things kept aside for this discussion -
PPF equivalent - INR 70 lakhs > for retirement can grow to an amount between INR 2 Crores (@4% returns) to INR 4.5 Crores (@7% returns), will cover this again when I mention Retirement below.
Inherited Properties - as there is no plan for liquidation, excluding this completely.

Decisions to be made -
1. Investment Options
2. Housing Buy/Rent
3. Financial freedom/independence

Lets go through each of these and I will add more for your consideration as they will have a weightage on all future decisions.

1. Investment Options
A> Commercial real estate with investment on INR 4 Crores and return of INR 1.5 lakhs per month
Pros -
Regular month income
Commercial Real Estate asset

Cons -
Return on Investment is 4.5% before reducing charges for maintenance, may be below 4% net in hand
Rental Income is taxable (added to other incomes and taxed as per slab rate) expect highest tax rate of 30% as total income will exceed INR 30 lakhs (Salary + rent)
All available funds will be deployed

Note - Commercial real estate appreciation is primarily based on location. Capital gains on Commercial real estate attract tax at 20% as of now.

B> Lets consider an alternative approach assuming investment is for a long term which is usually for real estate assets e.g. 20 years
Invest INR 4 Crores in Mutual funds.
A well diversified portfolio can generate 12% returns over the long term. The Corpus after 20 years will be over INR 38 Crores.

But considering your requirement for a monthly income from this investment, lets do another approach. Split your Investment.
Invest INR 2 Crores in a well diversified Mutual Funds portfolio expecting a 12% return - Corpus at the end of 20 years = INR 19+ crores
For regular income, Invest INR 2 Crores in Balanced Advantage mutual funds and considering a modest return of 10% (last 10 years data will show higher returns). Keep investment for 1 year before withdrawing to attract Long term Capital Gains tax (tax efficient approach). After 1 year you can receive INR 1.5 lakhs per month (increasing at 5% annually) for the next 20 years.

Pros -
Investment generates higher rate of return, Corpus growing/compounding at 12% return
Regular month income
Investment returns are more tax efficient
Flexibility to deploy all or partial funds towards building a corpus
Corpus can be liquidated in future much faster and easily than Real estate

Cons -
No real estate asset

Recommendation - Approach B is recommended as this will provide liquidity and appreciation towards wealth creation. This will also provide availability of funds for a new venture as and when required if that becomes a viable option in the future.

2. Housing Buy/Rent
If you plan to stay in India for long and settle down (not clearly indicated considering career options), you can consider buying a house property. But if the work location is not what you believe to be the place where you would like to settle down, then start with a Rental option and over time reconsider location for buying option.

Buying Property
Pros -
Asset is generated
Stability of residence if/when self occupied
Some amount of tax deductions/exemptions can be claimed if Loan is taken

Cons -
A large amount of funds required/blocked for full payment / partial payment (with loan)
EMI on Loan reduces income/funds in hand
EMI is much higher than rent
Locked to the property, change will be expensive

Renting Property
Pros -
Capital is not deployed immediately
Rent can be claimed for tax benefits
Provide opportunity to consider long term housing decision
Difference between EMI and Rent can be Invested to generate a good corpus
Flexibility to move jobs across locations

Cons
No Asset is generated
Rent is an expense
No sense of ownership in the house you stay

So in summary, the decision is more individual and how you perceive the house property as an asset. For flexibility to settle down in your career in India I can recommend to start with a Rental option and I am sure in a few years you will know where and what to buy (if at all) towards your house property. Also Location is again critical towards budget and type of housing to consider.

3. Financial freedom/independence
This is probably more important than we realize. With time if we accumulate debt through loans, and expenses, this is one goal which takes a back seat.
Assuming you have worked on the above 2 goals and finalized your options/approach for them, I would strongly recommend you plan your monthly expenses and cash in/outflows to understand what amount you have in hand that can be considered towards savings for the future.
With a long road ahead in your work life (another 20+ years), Asset allocation needs to be considered when planning to deploy your savings. Equity based investment can provide health returns for investments that are for more than 7 years and a well diversified Mutual Fund portfolio can achieve this. For requirements within 5-7 years do consider debt products to park your money and earn modest returns giving priority to liquidity and safety.

Few very important points are not mentioned but I would like to highlight and you should start considering them immediately.

1. Life Insurance - Buy a Term Life plan for yourself and once your wife starts earning, for her too. The amount needs to be calculated and my final recommendation (last para below) will cover this. Start with INR 50 lakhs and keep adding based on the Financial plan.

2. Health Insurance - Buy a good coverage for Family (even though you may have some with your employer). Recommend to go upto 1 Crore (and there are multiple options Base cover + Top-up covers for this).

3. Emergency Funds - Keep aside at least 6-9 months of expenses as emergency funds in a safe and liquid investment e.g. Fixed Deposits.

4. Your child's education - Within another 1.5 years schooling (pre-primary) will start and the education expenses are not as easily managed now. They will require a plan as they escalate very quickly as the child moves towards higher levels of education. Education inflation is in the range of 12% ~ 15% on average. So depending on what your decide for the school/education institute, this becomes a considerable amount and if unplanned may erode your corpus very quickly.

5. Though you have mentioned Retirement briefly, the PPF-equivalent amount will not be sufficient for retirement. Retirement typically at 60 years of age demands a corpus to cover the next 20-25 years of lifespan. Considering inflation may be just getting covered by the modest returns on your INR 70 lakhs fund, you are definitely short on the retirement side.

As you can see we have not considered the inherited property in this discussion, it can have a considerable impact towards your over financial plan.

Though I have provided some responses to your individual queries, this will still need a more comprehensive Financial Planning.
Hence I strongly recommend you approach a Certified Financial Planner and go through the process to arrive at a Financial plan which will be in sync with your Life plan. A CFP will take into account all aspects of your personal preferences and guide you towards various options and alternatives you can consider. The comprehensive Financial plan will include/cover all aspects of Investment management, Risk management (life and health Insurance), Retirement planning and Tax management - a tax efficient approach towards your requirements. Please remember just as Life is ever changing and evolving for each of us, so will your Financial plan require the changes and evolution to stay relevant for you, and this is where a CFP will add the most value when you have a long association. A CFP will plan and re-plan your goals and its requirements over the years and provide options and recommend the amounts and product categories to consider for each of them.

Best wishes for you to settle down and hope the above has provided a start towards it.

Thanks & Regards
Janak Patel
Certified Financial Planner.
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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Ramalingam

Ramalingam Kalirajan  |8479 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Asked by Anonymous - Jun 11, 2024Hindi
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I am 43 years old, have 13 yrs son in 9th std, 8yrs daughter in 3rd std. Both in India. Currently i am NRI monthly 5lacs salary. But soon coming back to india my salary will be 2.3lac per month. I have 1plot size 30x40 in bangalore. Around 5acres of active agricultural in native tier 3 city. I have epf balance 30lacs(not performing last 2.5yrs) . Current bank balance is 10lacs. Have sukanya samruthi for my daughter 10k per month (around 4lacs in account) Around 500gm gold jewel, wife(home maker, not nri) having 250gm gold, 1.5acre agri land in her name purchased by me with good potential for real estate. Invested in stock market 1lac recently in my wife's name. No debt now. Planning construct home 1cr(will get rent 40k per month) in 1year in bangalore, planning to buy car 15lacs less than 2years. Own home in village. Holding 1cr term insurance. My current family expense 1lac per month(including school fees, petrol etc.)Kindly advice me for kids education marriage and my retirement corpus. Currently having 2nd old santro for my personal travel in India.
Ans: Thank you for sharing the details of your financial situation. I understand your goals and concerns, and I appreciate the effort you’ve put into securing your family’s future. Let's analyze your financial position and provide a comprehensive plan for your children's education, their marriage, and your retirement.

Understanding Your Financial Situation
Current Income and Assets
Monthly NRI Salary: Rs 5 lakhs
Upcoming Indian Salary: Rs 2.3 lakhs per month
Plot in Bangalore: 30x40
Active Agricultural Land: 5 acres
EPF Balance: Rs 30 lakhs
Bank Balance: Rs 10 lakhs
Sukanya Samriddhi Yojana: Rs 10,000 per month (Rs 4 lakhs in account)
Gold Jewelry: 750 grams (500 gm yours, 250 gm wife’s)
Agricultural Land (Wife’s name): 1.5 acres
Recent Stock Investment: Rs 1 lakh (wife’s name)
Current Family Expenses: Rs 1 lakh per month
Term Insurance: Rs 1 crore
Plan to Construct Home: Rs 1 crore (rent: Rs 40,000 per month)
Plan to Buy Car: Rs 15 lakhs (in less than 2 years)
Own Home in Village
Current Car: Old Santro
Financial Goals
Children’s education
Children’s marriage
Retirement corpus
Construct home and generate rental income
Purchase a car
Evaluating Your Assets
EPF Balance
Your EPF balance of Rs 30 lakhs is substantial but hasn’t been performing well. It’s crucial to reassess this investment and consider moving a portion to other instruments that may offer better returns.

Agricultural Land and Plot
Agricultural land and the plot in Bangalore are valuable assets. The agricultural land in your wife’s name has real estate potential, which can be considered for future use or sale.

Gold
Gold is a secure investment and can be used as a safety net in times of need. It’s good to have a portion of your assets in gold.

Stock Market Investment
Investing in stocks can yield high returns, but it’s also risky. Ensure you’re diversifying adequately to manage risk.

Planning for Children’s Education and Marriage
Education
Estimate Future Costs: Education costs are rising. Estimate the future costs for both your children’s education. Consider inflation and choose investments accordingly.

Investment Vehicles: SIPs in mutual funds are an effective way to build an education corpus. Diversify between equity and debt funds for balanced growth and safety.

Marriage
Estimate Marriage Expenses: Determine a realistic amount for marriage expenses considering current trends and inflation.

Long-Term Investments: For long-term goals like marriage, consider investing in PPF, Sukanya Samriddhi Yojana (for your daughter), and balanced mutual funds.

Retirement Planning
Retirement Corpus
Calculate Corpus Needed: Estimate the amount you’ll need to maintain your lifestyle post-retirement. Consider inflation and life expectancy.

Diversified Portfolio: A mix of mutual funds, fixed deposits, and pension schemes can help create a robust retirement corpus.

Monthly Contributions
Systematic Investments: Allocate a portion of your salary towards SIPs in mutual funds. Diversify between equity, debt, and hybrid funds for balanced growth and safety.

EPF and PPF: Continue contributing to EPF and PPF. They offer tax benefits and relatively secure returns.

Construction of Home and Rental Income
Construction Plan
Budget Management: Ensure the construction cost of Rs 1 crore is within your budget. Consider taking a home loan if necessary but ensure it’s manageable within your salary.

Rental Income: The expected rental income of Rs 40,000 per month will help supplement your monthly income. This can be allocated towards your children’s education or marriage fund.

Tax Benefits
Home Loan Interest: Utilize tax benefits on home loan interest under Section 24(b) of the Income Tax Act.

Principal Repayment: Avail of tax deductions on the principal repayment under Section 80C.

Buying a Car
Budget Allocation
Down Payment and Loan: Decide on the down payment and the amount to be financed through a loan. Ensure the EMI is affordable within your post-return salary.

Savings Plan: Start a dedicated savings plan for the car purchase to avoid large financial strain at the time of purchase.

Maintaining Emergency Fund
Emergency Fund
Allocate Funds: Maintain an emergency fund equivalent to 6-12 months of your monthly expenses. This ensures financial stability in case of unforeseen circumstances.

Liquid Investments: Keep the emergency fund in liquid investments like savings accounts or liquid mutual funds for easy access.

Risk Management
Insurance
Health Insurance: Ensure adequate health insurance coverage for your entire family. Consider enhancing your current health insurance plan given the rising medical costs.

Term Insurance: Your Rs 1 crore term insurance is good. Reassess the coverage to ensure it meets your family’s needs.

Diversification
Diversified Portfolio: Diversify your investments across various asset classes to reduce risk and improve returns.

Regular Review: Regularly review your investment portfolio and rebalance it to align with your financial goals and risk tolerance.

Creating a Financial Plan
Setting Clear Goals
Specific Goals: Define specific financial goals for your children’s education, their marriage, and your retirement.

Timeframes: Set realistic timeframes for each goal to help in planning and tracking progress.

Monthly Budget
Income Allocation: Allocate your income towards various expenses, savings, and investments. Ensure you’re saving and investing a significant portion of your income.

Expense Tracking: Track your expenses to ensure you stay within your budget and can allocate more towards savings and investments.

Professional Guidance
Certified Financial Planner (CFP): Consult a CFP to help create a detailed financial plan tailored to your needs and goals.

Regular Monitoring: Regularly monitor and review your financial plan with your CFP to make necessary adjustments based on changing circumstances.

Final Insights
You have a solid foundation with various assets and a good income. By strategically planning your investments and expenses, you can comfortably achieve your financial goals. Focus on diversifying your investments, maintaining an emergency fund, and seeking professional advice. This will ensure your children’s education and marriage are well-funded, and you can enjoy a comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8479 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 16, 2024

Asked by Anonymous - Sep 15, 2024Hindi
Money
Hello Sir, I am 44 and my wife is 41 and we are both working in software industry and have a 10 year old daughter. We have taken home salaries of 3.5 L and 3 L per month. At this point we have real estate worth of around 6 crores (2 flats and 2 plots) and rental income from one of the flats is 20k. Our other assets are PF - 1 CR, PPF - 20 L, NPS - 20 L, NPS - 20 L, Sukanya Samrithi - 10 L, Mutual funds - 50 L, Bank FD's - 50 L, Shares / options / RSU's - 60L and Gold - 1.5 CR We have monthly investments of Mutual Fund SIP's - 1.5 L Bank RD'S - 1.2 L PF - 1 L PPF - 25000 NPS - 25000 Sukanya Samrithi - 12500 Our ancestral inheritance would be roughly 8 CR's We have 2 cars and don't have any loans or EMI's and current monthly expenses is around 1.5 L and typically take an international vacation every year. Considering the uncertainty in corporate sector we want to achieve financial independence and invest our surplus money. Please advice
Ans: You and your wife are in a very stable financial position. Your combined home salary is Rs 6.5 lakh per month, which is a strong base. Additionally, you have significant real estate assets worth Rs 6 crores, alongside other investments such as provident funds, mutual funds, shares, and gold. Having no loans or EMIs gives you financial flexibility, and your monthly expenses of Rs 1.5 lakh allow for substantial monthly investments.

You already have:

Real estate worth Rs 6 crore (two flats and two plots)
Rental income of Rs 20,000 per month
Provident fund (PF) – Rs 1 crore
Public Provident Fund (PPF) – Rs 20 lakh
National Pension System (NPS) – Rs 20 lakh
Sukanya Samriddhi Yojana (SSY) – Rs 10 lakh
Mutual funds – Rs 50 lakh
Bank fixed deposits (FDs) – Rs 50 lakh
Shares, options, and RSUs – Rs 60 lakh
Gold – Rs 1.5 crore
Ancestral inheritance – Approximately Rs 8 crore
Monthly SIPs in mutual funds – Rs 1.5 lakh
Bank recurring deposits (RDs) – Rs 1.2 lakh
Provident fund (PF) – Rs 1 lakh
Public Provident Fund (PPF) – Rs 25,000
National Pension System (NPS) – Rs 25,000
Sukanya Samriddhi Yojana (SSY) – Rs 12,500
Financial Independence and Investment Strategy
Evaluate Asset Allocation
Your current investment portfolio is quite diversified. However, it’s heavily skewed toward real estate and gold. While these are valuable, both asset classes are typically illiquid, and they don’t provide regular income or substantial growth over time.

Real estate can be difficult to liquidate in emergencies or during downturns, and gold doesn’t generate regular income either.

Recommendations:
Increase Allocation to Financial Assets: You should focus on shifting a part of your real estate and gold assets into more liquid, growth-oriented financial assets such as mutual funds and stocks. This will provide better returns over the long term and more flexibility.

Diversify Further into Equity Mutual Funds: Consider increasing your SIPs in mutual funds. Equity-based mutual funds, especially actively managed ones, can offer higher returns compared to fixed deposits or RDs over the long term.

Reduce Dependence on Fixed Income Instruments: You have significant investments in fixed deposits and recurring deposits. These offer safety but at lower returns. Reducing your exposure to fixed-income instruments and increasing exposure to equity will balance growth and safety. The PPF, SSY, and NPS already provide sufficient debt exposure.

Liquidity Management
Increase Emergency Fund: While your savings and investments are robust, ensure you have an emergency fund equivalent to 6-12 months of expenses in a liquid, easily accessible account, such as a savings account or a liquid mutual fund. This ensures liquidity for unforeseen expenses.
Long-term Wealth Creation
Actively Managed Mutual Funds
Consider Regular Fund Investments via a Certified Financial Planner: Regular funds, guided by a certified financial planner, give you the benefit of professional management and fund recommendations. While direct funds may offer lower expense ratios, regular funds offer insights and advice that often lead to better long-term gains.

Avoid Index Funds and ETFs: While they offer low-cost exposure to the market, index funds and ETFs generally lack the dynamic approach that actively managed funds provide. In the uncertain corporate environment you mentioned, actively managed funds can adjust to market conditions better, potentially safeguarding your capital.

Tax Efficiency
Maximize Tax-advantaged Investments
Utilize Tax-efficient Investment Strategies: Continue contributing to tax-saving schemes such as PPF, NPS, and Sukanya Samriddhi Yojana. Additionally, tax-efficient equity funds (such as ELSS) can help you save on taxes while offering better long-term returns than debt instruments.

Review Gold Holdings: Consider selling a portion of your gold investments and reallocating them into financial assets. Gold doesn’t generate any income, and capital gains are taxed when sold. By reallocating to mutual funds or equities, you can create a more tax-efficient growth strategy.

Planning for Your Daughter’s Future
You are already investing in the Sukanya Samriddhi Yojana, which is a good step. However, you may want to consider adding child-specific mutual fund plans to ensure her education and marriage expenses are met without any shortfall.

Increase SIPs with a Goal-based Strategy: You can allocate additional SIPs in mutual funds with the goal of your daughter’s education and marriage. This will allow you to benefit from compounding returns, and you can adjust the risk level based on the time horizon.
International Vacations and Lifestyle
You have mentioned that you take international vacations regularly. Given that lifestyle is important to you, it’s crucial to balance financial independence with your desire for experiences.

Create a Separate Travel Fund: Set aside a small percentage of your monthly savings specifically for vacations. This ensures that your other financial goals, such as retirement, are not affected by discretionary spending on travel.
Retirement and Financial Independence
Retirement Planning
Given the uncertainty in the corporate sector, planning for early retirement and financial independence is wise. Your current investments, combined with the significant inheritance you expect, should provide you with a strong base for retirement.

Set a Retirement Corpus Goal: With your high monthly savings and disciplined investment strategy, aim for a retirement corpus that can sustain your lifestyle, cover medical expenses, and leave a legacy. Considering your current expenses of Rs 1.5 lakh per month, factor in inflation and aim for a corpus that generates enough passive income.

Diversify NPS Contributions: While NPS is an excellent long-term retirement instrument, ensure you select a high equity allocation for better growth. Given your current age, you can afford to take some risks for better long-term returns.

Ancestral Wealth and Estate Planning
Legacy and Inheritance Planning
With a large inheritance expected (Rs 8 crore), estate planning becomes crucial. It’s important to decide how you want to pass on your wealth to the next generation.

Draft a Will: Ensure that both you and your wife have clear wills in place to avoid any legal complications for your daughter. Also, consider consulting an estate planner to efficiently distribute your inheritance in a tax-efficient manner.

Create a Family Trust: Given the size of your estate, you may want to explore setting up a family trust. This will protect your assets and ensure a smooth transfer of wealth to your daughter.

Final Insights
Your current financial standing is solid, and your disciplined investment approach will help you reach financial independence soon. However, to improve liquidity and enhance growth, consider the following:

Increase your allocation to equity mutual funds and actively managed funds.

Reduce reliance on real estate and fixed deposits, which may limit growth potential and liquidity.

Continue focusing on tax-efficient investment strategies to maximize post-tax returns.

Plan for your daughter’s future education and marriage expenses through goal-based mutual fund investments.

Ensure your estate is well-planned through wills and a potential family trust.

By making these adjustments, you can balance financial security, long-term growth, and your lifestyle needs.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8479 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 23, 2024

Money
Hello Ramalingam sir, Nice to see you are replying to numerous queries raised by young Indians. Thank you very much. I and my wife earn 4,60,000 per month(post tax), we both age at 39 years. Two kids(daughter 9 years, son 2 years). Our monthly portfolio & expenditure goes like below Debt(24% of 460K): PF -40K, VPF-20k , PPF-12.5k(yearly 150K), SSY for daughter-12.5k(yearly 150K), Bank RD-5k, NPS – tier1 – 20k. Total: 1,10,000/month Mutual fund (35% of 460k): Large cap – 63k, Mid cap – 48k, Small cap – 45K, Debt – 4k. Total 1,60,000/month. I will step up yearly by 10% once my loans closes(after 4 years). My aim to invest in mf till the age of 55. Loans(24% of 460k, remaining tenure 4 years): Home loan emi-75k, company car lease emi -35k. Total 1,10,000/month Monthly Expenditure(17% of 460k): 80K/month Real estate: I have 2 plots: one in my native purchased in 2012 at 5 lacs, current date value might be around 15 lacs. One more plot is in Bangalore, purchased in 2015 at 13 lacs, current date value might be around 30 lacs. I have own house in my native currently my parents stay( My parents have built this) but I will be staying here after my retirement. I Own a flat in Bangalore where I am currently staying, current value of the flat is 1.1cr Term insurance: I am planning to purchase in April 2025, the term insurance of 1.5 CR for myself(for my wife no term insurance) Group medical insurance for family(company sponsored, combined 10 lacs). No self-sponsored health insurance. My queries are as below 1) How much money I need post-retirement, current expenditure is 80,000/month, retirement age is 55, life expectancy 90 years? 2) How much monthly SWP I should do for current monthly expenditure of 80k. SWP will start when I turn 55 years. 3) Is company sponsored health insurance is fine till I retire. Or should I purchase (if yes what is the idle value for my case?). I don’t have smoking and drinking habits 4) Is 1.5cr of term insurance of mine is sufficient post 55 years? 5) What would be the rough inflation rate to consider? 6) Please suggest any modifications required for the above portfolio.
Ans: It’s great to see that you and your wife are disciplined savers and investors. Your current portfolio is well-structured with a balanced approach across different asset classes. Let's analyze and address your queries systematically.

1) How Much Money Do You Need Post-Retirement?
Your goal is to retire at age 55 with a life expectancy of 90 years. This means you are planning for 35 years of post-retirement life.

Your current monthly expenditure is Rs 80,000. Post-retirement, expenses may rise due to inflation. To plan accurately, considering a realistic inflation rate of around 6-7% is essential.

Therefore, you need a corpus that can generate enough income to sustain your lifestyle for 35 years. The target retirement corpus should be able to cover both your monthly expenses and potential medical emergencies.

You may also want to factor in inflation and potential increase in healthcare costs over time, which can take up a substantial portion of your budget post-retirement.

2) How Much Monthly SWP to Support Rs 80,000 Monthly Expenditure?
Once you retire, you can use Systematic Withdrawal Plans (SWPs) from mutual funds to receive a monthly income. Your current expenditure is Rs 80,000/month, which will need to be adjusted for inflation by the time you reach 55.

SWPs allow you to withdraw money regularly while keeping the remaining balance invested, which helps the corpus continue to grow. Ideally, you should withdraw an amount that does not deplete your portfolio too quickly.

If inflation is considered, the equivalent of Rs 80,000 today could be much higher by the time you retire. A corpus that generates Rs 1.5 lakh per month would be a good target. It’s advisable to have a large enough corpus that supports your lifestyle, even as costs rise over time.

You may need to gradually increase your SWP withdrawals over the years to ensure you keep up with rising expenses.

3) Is Company-Sponsored Health Insurance Sufficient?
While your company-sponsored health insurance of Rs 10 lakh covers your family for now, it’s important to consider having additional coverage. As you approach retirement, relying solely on company-sponsored health insurance may become risky.

Healthcare costs rise significantly with age, and a medical emergency could strain your finances if your coverage is inadequate.

Here’s why you should consider purchasing a separate health insurance policy:

Post-retirement health needs: Medical costs tend to increase with age, and company-sponsored insurance might no longer be available after retirement.

Inflation in healthcare: Healthcare inflation is higher than normal inflation, so you may need more coverage over time.

Consider a family floater health policy of Rs 20-30 lakh with top-ups as a backup plan.

This will ensure you are well-covered in case of any unforeseen medical situations, even after retirement.

4) Is Rs 1.5 Crore Term Insurance Sufficient Post-55?
You plan to purchase a term insurance policy of Rs 1.5 crore in April 2025. This is a good step to protect your family’s financial future. However, after the age of 55, your need for life insurance may reduce, as by then, you may have accumulated a substantial retirement corpus and other assets.

Here are a few factors to consider:

No loans: After the age of 55, you’ll likely have paid off your home loan and car lease, reducing the financial burden on your family.

Reduced liabilities: By 55, your children might become financially independent, reducing the need for large coverage.

However, Rs 1.5 crore term insurance for the next few decades is still a good option, especially if your retirement corpus falls short or you wish to leave behind a financial legacy for your children.

If your financial goals are on track and your corpus is adequate, you may consider reducing your insurance coverage post-55. For now, however, Rs 1.5 crore should be sufficient to cover your family’s needs in case of an unfortunate event.

5) What Would Be the Rough Inflation Rate to Consider?
Inflation plays a significant role in determining the real value of your savings over time. Historically, the average inflation rate in India has been around 6-7%.

For long-term financial planning, it’s safe to assume a 6-7% inflation rate while calculating your retirement corpus. Healthcare inflation is usually higher, often around 10-12%, so it’s crucial to account for that separately when planning for medical expenses post-retirement.

If inflation remains high, you’ll need to increase your investments accordingly to ensure your post-retirement income keeps up with rising costs.

6) Portfolio Suggestions and Modifications
Your portfolio is well-diversified with a focus on debt, mutual funds, and real estate. However, there are a few areas where minor adjustments can help you achieve your goals more efficiently.

Debt Investments (24% of Income):
You are currently investing a significant amount in debt instruments like PF, VPF, PPF, and SSY. These offer steady returns but may not beat inflation in the long run.

Your debt portion (24% of income) is appropriate given your age, but as you approach retirement, you may want to gradually increase your allocation to debt for capital preservation.

Continue with NPS Tier 1 contributions as this will provide tax benefits and help build a retirement corpus.

Mutual Fund Investments (35% of Income):
You have a good mix of large, mid, and small-cap mutual funds. However, you could consider slightly increasing the large-cap allocation as you approach your retirement age for stability.

Ensure you are investing in actively managed mutual funds rather than index or direct funds, as actively managed funds can outperform the benchmark over time.

Debt funds can offer better returns than RDs. You may want to consider increasing your allocation to short-term debt funds or dynamic bond funds for relatively safer returns compared to traditional bank RDs.

Loans (24% of Income):
Your loan EMIs are well within a reasonable portion of your income.

Since you plan to step up your SIPs by 10% once the loans close in 4 years, this is an excellent strategy to increase your investments while being debt-free.

Real Estate:
You have made some good investments in real estate with two plots and a flat. The current value of your flat (Rs 1.1 crore) and plots (total value Rs 45 lakh) gives you a significant real estate holding.

Since you already have multiple properties, it may be better to focus on financial assets (mutual funds, debt instruments) for future investments.

Insurance:
As discussed earlier, consider purchasing additional health insurance for your family.

The Rs 1.5 crore term insurance is sufficient for now, and you can review it post-retirement.

Final Insights
You are on the right track with your financial planning. Your portfolio is well-balanced, and you have a disciplined approach to savings and investments. A few key steps can further strengthen your financial position:

Increase health coverage beyond company-sponsored insurance.

Continue to step up your SIPs by 10% after your loans close.

Stick to actively managed mutual funds for higher potential returns over index funds or direct funds.

Plan your SWP carefully to ensure your post-retirement income keeps pace with inflation and healthcare needs.

Your current financial situation and discipline in managing expenses set you up for a comfortable retirement. With a few adjustments, you’ll be well-prepared to achieve your financial goals.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/

..Read more

Ramalingam

Ramalingam Kalirajan  |8479 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2025

Asked by Anonymous - Apr 19, 2025
Money
I am looking for personal finance advice. I am a working processional (private company) based out of Bangalore and 40 years old. I am married (wife at 34 years) with a kid of 6 years. I also have parents, father at 70 years and mother at 65 years. So total members in my family is 5. I am planning to work in Bangalore for maximum 3 more years and will relocate to Kolkata, and try to find out a less stressful job for myself. Overall, the total liquid asset we have is 5 cr INR. Father gets pension 40,000 INR per month. Apart from these 2, we don't have any other asset. We have floating health insurance of 13 Lakhs, which covers all 5 of us. After I relocate to Kolkata, how should we plan to invest 5 Cr to ensure we have a moderate lifestyle, can cover my sons higher education, and occasional domestic vacation? Note: After relocating to Kolkata, I am my wife both will look for some work, to cover our monthly expenses, but until that happens, we need to plan everything with our existing assets. Looking for expert opinion please. Thanks in advance.
Ans: You are in a very strong position. You have built Rs. 5 crore in liquid assets. Your future goals are realistic and balanced. Let us work through your plan step by step with full clarity.

Below is a 360-degree approach to help you.

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Assessing Current Financial Strength

Your liquidity of Rs. 5 crore is a big strength.

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No current liability or loan gives you full control.

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You already have a health cover for all five family members. That is very important.

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Your father’s pension of Rs. 40,000 monthly adds stability to the family income.

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Your willingness to relocate and reduce stress is a healthy lifestyle decision.

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Your child is 6 years old. You have 10 to 12 years to plan for higher education.

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You and your wife are open to earning again later. This gives extra cushion.

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Let us now look at how to deploy this Rs. 5 crore smartly.

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Breakdown of Your Corpus for Better Control

Always divide corpus into different buckets based on purpose and timeline.

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Each bucket should have its own investment strategy.

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It will help you avoid panic during emergencies or market volatility.

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Let us define these buckets for you:

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1. Emergency Bucket

This bucket is for all unforeseen expenses.

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Keep 6–12 months of expenses in this.

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Include money for any sudden medical, repair, or temporary job loss.

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Use bank FD, sweep-in FD, or liquid mutual funds for this.

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Target: Rs. 20 to 25 lakhs

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2. Income Support Bucket (Post-Relocation)

Once you move to Kolkata, income may stop for some time.

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You will need to draw from this to manage expenses.

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Keep at least 2–3 years’ worth of expenses here.

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Choose low-risk and tax-efficient options like arbitrage funds or ultra short-term funds.

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Do not use equity or stocks for this bucket.

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Target: Rs. 40 to 50 lakhs

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3. Education Goal Bucket

Your child’s college education will need funds after 10 to 12 years.

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This can be partly in India or abroad, based on your goals.

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Equity mutual funds are best for long-term education goals.

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Invest using SIP or staggered lumpsum over 2 years.

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You can take slightly higher risk here to beat inflation.

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Target: Rs. 1 to 1.25 crore

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4. Lifestyle Bucket

This is to maintain your moderate lifestyle and travel plans.

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You want occasional domestic holidays and comfort.

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You can use a mix of hybrid mutual funds and a Systematic Withdrawal Plan (SWP) from balanced funds.

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You may also use part of this for big ticket spends like appliances or short family trips.

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Target: Rs. 75 lakhs to Rs. 1 crore

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5. Long-Term Wealth Bucket

This is your main wealth-building and retirement support engine.

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Your corpus has to grow to protect your future.

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Use well-chosen actively managed equity mutual funds.

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Avoid direct stocks unless you track them deeply.

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Do not invest in index funds. They give average return, not smart return.

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Active funds have expert fund managers. They beat the market over time.

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Regular mutual funds through a Certified Financial Planner will help you plan properly.

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You get guidance, rebalancing, and emotional discipline.

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Direct funds look cheaper but offer no support.

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You must pay attention to suitability, not only costs.

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Target: Rs. 1.75 crore to Rs. 2 crore

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Surrender of LIC or ULIP (If Any)

If you hold LIC endowment or ULIP policies, review them.

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Most of these give low returns and poor liquidity.

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Consider surrendering and reinvesting in mutual funds.

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A Certified Financial Planner can assess this carefully.

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This step may boost your wealth by better compounding.

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Health Insurance Planning

You already have a Rs. 13 lakh family floater.

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Confirm if it has separate or shared room limits.

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Check if parents have individual coverage or not.

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You may add super top-up if required.

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Medical inflation is high. Review policy every 2–3 years.

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Term Life Insurance (If Any)

If you are the only earning member, keep term insurance.

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Amount should cover your child’s needs and wife’s future.

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If not already taken, do it before quitting the job.

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Premium is low if taken early and healthy.

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Tax Planning After Relocation

Once income drops or stops, your tax bracket will reduce.

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You can use this to book long-term capital gains below limit.

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Plan your withdrawals to stay in lower tax bracket.

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Mutual funds help you do tax-efficient withdrawals.

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Post-Relocation Income Search

You plan to take a lighter job later. Keep that flexibility.

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Choose work that allows good balance and adds purpose.

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Your wife can also pick flexible part-time or remote roles.

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Even Rs. 40,000 to Rs. 60,000 per month from each of you helps.

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That will reduce stress on your corpus.

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Keep your emergency bucket untouched during this phase.

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Estate Planning

You have parents and a child to think about.

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Write a simple will to define all asset sharing.

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Keep nominations updated in mutual funds and FDs.

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This will help your family in case of any emergency.

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Do not delay this step. It is important.

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Regular Review and Rebalancing

Your investment plan should be reviewed every year.

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If goals change, your plan must adapt.

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Markets go up and down. That’s normal.

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Do not panic. Stick to your buckets and goals.

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A Certified Financial Planner can guide your review.

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You get mental peace by following a set structure.

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Final Insights

You have done well to save Rs. 5 crore by age 40.

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This can support your family for years if used wisely.

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Divide your corpus by purpose. Don’t mix goals and timeframes.

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Do not lock funds in physical assets again.

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Real estate is hard to exit. Keep focus on liquidity and growth.

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Avoid index funds. Choose active funds with expert guidance.

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Use mutual fund SIPs and staggered investments for better risk control.

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Keep wife involved in all planning. It helps in family clarity.

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Stick to a 360-degree plan. Avoid reacting to news or friends’ advice.

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This approach will protect your lifestyle and child’s future.

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

..Read more

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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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