38-Year-Old Businessman in Pune Asks: Is My Current Portfolio Enough to Support My Retirement?

Ans: Hello;

Query1:

Yes it is better to sell low rent yielding commercial property now, utilise the sell proceeds to fund you goals next year i.e. daughter's marriage, son's education and car purchase while the balance should be invested in mutual funds(equity savings type mutual fund)

Query 2:

Exit all inactive mutual funds and invest corpus(16.9 L) in Mirae Asset equity savings fund (low to moderate risk profile).

You should then start an SWP at 3.6% so as to generate income of 5 K for additional monthly allocation to NPS.

You should do SIP only in following 3 funds:
SBI hybrid equity fund(15 K)
HDFC balanced advantage fund (15 K)
ICICI Pru Multi asset allocation fund (15 K)

The taxation of these funds is like equity funds but they have exposure to alternate asset classes to impart some stability to corpus during extreme market fluctuations which is also suited for your age category.

Liquid assets+ gold+ NPS corpus will add up to approx 6.51 Cr which if annuitized will yield post tax monthly income of 2.15 L.

MF corpus may still grow to build up your inflation war chest.

Health care cover for family needs enhancement upto 50 L minimum as a safe precaution.

Reduce exposure to direct equity as you near retirement. You may continue trading as a hobby with a minimum risk capital with adequate knowhow, setup and temperament.

Happy Investing!!

You may follow us on X at @mars_invest for updates.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: Hello;

What is the expected monthly rental from industrial plot and machinery?

Are you currently occupying one of the flats mentioned here or are all of them given on rent?

Also your term life insurance is very low. You should have minimum term insurance cover of 2.4 Cr.

You have good assets in agri land, industrial land, gold, real estate but they are relatively illiquid when need arises hence term insurance cover with riders for critical care and accident benefit are an absolute must!

Considering the home loan tenure of 17 years and 3 small kids in the family to be supported for education and decent lifestyle, I am not sure if you can retire in 7 years timeframe from now.

However I would appreciate your reply to my queries above, before I give my firm view about your retirement in 7 years timeframe.

Best wishes;

Ans: Your financial position is commendable, with diverse investments and significant assets. Let's carefully evaluate your portfolio and determine its adequacy for retirement.

Assets Evaluation
Industrial Plot: The industrial plot adds stability to your portfolio. However, it may not generate regular income.

Business Income: Rs. 24 lakh yearly income supports both savings and current expenses. However, this income will stop after retirement.

Company Investments (Machinery, Debtors, etc.): Rs. 2.4 crore in business assets holds potential but depends on liquidity. Ensure your business succession plan is well-structured.

Mutual Funds and Stock Market Investments: Rs. 2.1 crore in equity investments offers excellent growth potential. A well-diversified portfolio aligned with your goals is crucial.

Bank Fixed Deposits: Rs. 50 lakh provides safety but generates lower returns. This can be retained for emergencies or short-term needs.

Real Estate (3 Flats): Your flats have a combined value of Rs. 1.6 crore. Rental income post-retirement can support your expenses.

Gold: Rs. 25 lakh in gold acts as a hedge against inflation. Gold is a strong reserve asset but not an income-generating one.

Agricultural Land: Rs. 20 lakh in agricultural land may have limited liquidity. Future appreciation depends on market conditions.

Term Insurance: Rs. 20 lakh in term insurance offers coverage but is not an investment.

Liabilities Evaluation
House Loan: Rs. 30 lakh house loan with 17 years remaining. This liability will continue into retirement unless paid early.

Car Loan: Rs. 6.35 lakh car loan with five years remaining. Manage this liability to avoid cash flow pressure.

Retirement Planning Considerations
Expenses for 7 Members: Your family size increases post-retirement costs. This includes education and healthcare for children and adults.

Retirement Age of 45: Early retirement reduces your working years and increases the time funds need to last.

Inflation Impact: Rising costs of living must be considered for a long retirement period.

Corpus Utilisation: Your existing investments need to generate regular post-retirement income while growing to beat inflation.

Suggestions for Asset Allocation
Equity Investments: Continue equity investments in mutual funds and stocks for growth. Consolidate under-performing funds and consider active funds for better returns.

Real Estate Management: If rental income is not substantial, consider selling underperforming properties. Reinvest proceeds into diversified financial instruments.

Emergency Fund: Maintain Rs. 6-8 lakh in liquid funds or FDs for unforeseen expenses.

Loan Repayment Strategy: Prepay car and home loans with surplus funds to reduce interest outflow.

Gold and Agricultural Land: Retain as reserves but avoid additional allocation here.

Business Continuity Plan: Create a clear succession plan to ensure business sustainability. This will protect your assets and provide stability.

Additional Recommendations
Mutual Fund Review: Diversify across large-cap, mid-cap, and balanced funds. Avoid excessive exposure to one category.

Life Insurance Review: Ensure your term insurance covers at least 10-15 times your annual income. Consider increasing coverage for better security.

Health Insurance: Cover all family members with adequate health insurance. Opt for a Rs. 20-25 lakh family floater plan.

Children’s Education and Marriage: Start dedicated investments for these goals using equity mutual funds for long-term growth.

Retirement Corpus Calculation: Target a corpus that generates Rs. 3 lakh monthly. Include inflation-adjusted returns and expenses.

Creating a Retirement Income Plan
Systematic Withdrawal Plan (SWP): Invest a portion of equity funds in debt-oriented SWP to generate regular income.

Rental Income: Generate steady rental income from real estate properties to cover a portion of expenses.

Debt Funds: Allocate a portion to debt funds for stable returns. This helps balance equity risks.

Dividend Yield Stocks: Invest in high-dividend stocks for a regular income stream.

Periodic Portfolio Review: Monitor and adjust your portfolio annually to align with changing goals and market conditions.

Final Insights
Your current assets and investments are significant. However, early retirement requires careful planning. Focus on prepaying loans and optimising investments. Protect your family with adequate insurance and create a robust retirement income plan.

With disciplined investments and adjustments, your goal of retiring at 45 is achievable.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment