Retirement Planning for a 32-Year-Old Couple with a Goal of Rs. 20 Crores

Ans: Planning for Rs 20 crore retirement corpus is ambitious yet realistic for your profile.

It’s essential to evaluate your goals, current assets, and future savings growth.

Below is a detailed breakdown to assess your situation and strategy:

Estimating Future Requirements
At 32, you have 28 years to retire.

Current expenses are Rs 40,000 monthly, translating to Rs 4.8 lakh annually.

Considering inflation at 6%, annual expenses will multiply significantly by 60 years.

By retirement, your monthly expense may be Rs 3 lakh (adjusted for inflation).

To sustain expenses for 30 years post-retirement, Rs 20 crore is a reasonable goal.

Existing Investments and Their Growth Potential
1. PPF Contributions
Current contribution: Rs 1.5 lakh each per year.

With consistent contributions till 60, expect substantial compounded growth.

PPF is secure but offers moderate returns, around 7%-8%.

2. LIC Plan
LIC will provide Rs 2 crore at age 60.

Consider this a fixed component of your retirement corpus.

3. NPS Contributions
Current combined contribution: Rs 1 lakh annually.

NPS can generate higher returns (8%-10%) with exposure to equity and debt.

This will supplement your retirement corpus significantly.

4. Mutual Fund SIPs
SIPs of Rs 10,000 per month for 28 years can grow substantially.

Equity mutual funds are ideal for long-term growth.

Ensure the funds are actively managed for higher returns.

5. Fixed Deposits
Rs 36 lakh and Rs 1.6 crore in inherited FDs offer stability.

FD returns are lower and taxable.

Consider allocating some FD amounts into equity funds for better growth.

6. Gold Bonds
Rs 15 lakh in gold is a valuable inflation hedge.

Hold it as part of your diversified portfolio.

7. APY Pension
APY will provide Rs 5,000 monthly from age 60.

This is supplementary income for basic needs.

8. Provident Fund (PF) and Gratuity
Current PF corpus is Rs 8 lakh.

PF and gratuity will grow significantly by 60.

Consider this part of your core retirement corpus.

Investment Adjustments for Better Growth
1. Increase SIP Contributions
Increase your mutual fund SIPs from Rs 10,000 to Rs 50,000 gradually.

Equity funds provide better inflation-beating returns than other options.

2. Diversify Across Mutual Fund Categories
Invest in large-cap, mid-cap, and flexi-cap funds for a balanced portfolio.

Avoid relying heavily on debt-oriented funds due to inflation risks.

3. Review FD Allocation
Reallocate a portion of inherited and personal FDs to higher-growth assets.

Keep only the amount needed for short-term emergencies in FDs.

4. Monitor NPS Allocation
Choose a higher equity exposure (up to 75%) within NPS for growth.

Shift to safer funds five years before retirement.

5. Set Up Emergency Fund
Retain at least 6-12 months of expenses in liquid assets.

This protects against unforeseen expenses without disrupting long-term investments.

Strategies for Your Child’s Future
Start a separate SIP for your 1-year-old child’s education and future needs.

A Rs 10,000 monthly SIP in equity funds can build a strong education corpus.

Consider child-specific plans for goal-oriented investments.

Tax Efficiency in Investments
1. Tax on FDs
FD interest is taxable as per your income tax slab.

This reduces net returns.

2. NPS Tax Benefits
NPS contributions provide tax deductions under Section 80CCD.

Withdrawals have partial tax-free benefits.

3. Mutual Funds Taxation
Equity mutual funds attract LTCG above Rs 1.25 lakh at 12.5%.

Short-term gains are taxed at 20%.

Maintain a balance to minimise tax liabilities.

Health and Life Insurance
Rs 40 lakh mediclaim is good coverage for now.

Consider increasing it to Rs 1 crore for rising medical costs.

Review your LIC coverage to ensure it complements your investments.

Final Insights
Your current plan is on track for a Rs 20 crore retirement corpus.

Optimise by increasing SIPs, reducing FDs, and reviewing asset allocation.

Focus on equity-driven investments for long-term growth.

Regularly monitor and adjust your portfolio to stay aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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