Hi my name is Somani, I have completed 39 years and planning to retire in my career, below are my current financial situation.
Saving account: 5 Lac
FD: 15 Lac, all maturing in 2026
Mutual fund: 28 Lac (current value: 36 Lac, Large cap: 50%, Mid cap: 26%, Small cap: 22%, Other: 2%)
Gold Bonds: 3.5 Lac (current value: 6.85 Lac)
Equity share: 26 Lac (current value: 47 Lac)
NPS: current value: 6 Lac
EPFO: 12.25 Lac
PPF: 7.67 Lac
Term Plan: 1 Cr
Pension Plan after 60: 30k approx monthly
Health insurance: 13 Lac whole family
My wife is working and gets around 70k in hand
Having one daughter, age is 8 year and studying in 2nd class
My father is retired and below are his financial situation
Pension: 45k approx per month
FD: 1 cr
Equity Share/Mutual fund/ Gold bonds: 1 cr approx
Property: 80 Lac approx current valuation
Own House: 1.75 cr - 2 cr current valuation
Rental income: 18k approx per month
Please guide me on above data, how much corpus I should have to have a peaceful retirement considering my current monthly expense around 1.25 Lac per month.
Ans: You have a strong and diverse financial foundation. Let us analyse it comprehensively.
Liquid Assets
Savings account balance of Rs 5 lakh offers immediate liquidity.
Fixed deposits worth Rs 15 lakh maturing in 2026 ensure mid-term stability.
Investments
Mutual fund portfolio of Rs 36 lakh is well-diversified across large, mid, and small caps.
Gold bonds with a current value of Rs 6.85 lakh add stability and hedge against inflation.
Equity shares valued at Rs 47 lakh showcase significant growth.
National Pension System (NPS) holding of Rs 6 lakh offers retirement-oriented savings.
Retirement Savings
EPFO corpus of Rs 12.25 lakh and PPF balance of Rs 7.67 lakh ensure steady long-term growth.
Term plan coverage of Rs 1 crore secures your family's future.
Family Support
Your wife’s monthly income of Rs 70,000 provides stability.
Your father’s solid financial base and Rs 45,000 pension ensure reduced dependency.
Estimating Retirement Corpus
Retirement planning requires addressing future expenses, inflation, and longevity.
Monthly Expense Analysis
Your current expenses of Rs 1.25 lakh per month are significant.
Adjust for post-retirement expenses like reduced work-related costs but increased healthcare spending.
Corpus Needed
For a peaceful retirement, aim for a corpus that generates Rs 1.25 lakh monthly for at least 30 years.
Factor in inflation at 6-7% annually to maintain purchasing power.
A corpus of Rs 12-15 crore is recommended for financial independence.
Strategic Recommendations
Step 1: Optimising Current Assets
Avoid excessive reliance on savings accounts and fixed deposits due to lower returns.
Reinvest FD maturity proceeds into higher-yielding instruments like mutual funds.
Step 2: Enhancing Mutual Fund Investments
Increase mutual fund allocation to Rs 50 lakh in a staggered manner.
Focus on actively managed funds for better performance over passive options like index funds.
Diversify further across asset classes and maintain a balance between equity and debt.
Step 3: Consolidating Gold and Equity
Gold bonds and equity shares have grown well.
Retain gold bonds for stability but monitor equity shares for market risks.
Systematically transfer gains from volatile equity to stable debt funds or hybrid funds.
Step 4: Strengthening Retirement-Specific Savings
Increase contributions to NPS for additional tax benefits and retirement growth.
Continue regular contributions to PPF, which is risk-free and tax-efficient.
Maintain EPFO balance, and avoid withdrawing unless necessary.
Step 5: Creating a Balanced Corpus for Child’s Education
Your daughter is 8 years old, and higher education expenses will occur in 10-12 years.
Allocate Rs 25 lakh into child education-focused mutual funds or debt-oriented funds.
Start an SIP to build this fund systematically.
Step 6: Managing Health and Insurance
Your health insurance coverage of Rs 13 lakh is good. Ensure it includes critical illness coverage.
Consider top-up plans to cover any significant medical expenses in the future.
Review your term plan periodically to ensure adequate coverage.
Optimising Your Father’s Financial Portfolio
Active and Passive Income
Your father’s Rs 45,000 monthly pension is stable.
Rental income of Rs 18,000 adds a small but regular inflow.
Investment Portfolio Management
Consolidate his Rs 1 crore equity/mutual fund portfolio to reduce risks post-retirement.
Diversify between equity, debt, and fixed-income instruments for balance.
Monitor FD renewals to ensure competitive interest rates.
Property Considerations
His property portfolio offers a mix of rental and non-income-generating assets.
Avoid liquidating assets unless it becomes necessary to meet financial needs.
Tax-Efficient Strategies
Use ELSS mutual funds to save taxes under Section 80C while building wealth.
NPS contributions provide tax benefits under Section 80CCD(1B).
Plan mutual fund redemptions carefully to minimise long-term and short-term capital gains taxes.
Finally
A peaceful retirement requires balancing current and future needs.
Build a robust corpus through diversified investments.
Review your portfolio annually and make adjustments with the guidance of a certified financial planner.
Stay disciplined and prioritise long-term financial security over short-term gains.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment