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Ramalingam

Ramalingam Kalirajan  |7255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 14, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Nov 04, 2024Hindi
Money

I have corpus of 60 lkh ( from several MF / ULIP etc) ... can you please guide me how to invest in SWP to get regular monthly income of Rs.60000/- from Jan 2025 My prsent age is 52.. Or you may suggest me what is good for me .. Please.

Ans: creating a stable and secure monthly income plan is achievable with the right investment strategy. A Systematic Withdrawal Plan (SWP) can help ensure consistent income without eroding your capital too quickly. Here’s a comprehensive, 360-degree approach tailored to your needs.

Step 1: Establishing Clear Monthly Income Goals
Target Monthly Income:

Your goal is to achieve Rs 60,000 per month starting January 2025.
This translates to an annual requirement of Rs 7.2 lakh.
Inflation Consideration:

Since you’re only 52, consider a small annual increase to combat inflation.
Keeping up with inflation will ensure purchasing power in the long term.
Step 2: Setting Up a Systematic Withdrawal Plan (SWP)
An SWP in mutual funds can provide regular monthly income while preserving the principal amount as much as possible.

Choosing the Right Funds:

Balanced Advantage Funds: These funds adjust equity and debt exposure based on market conditions, balancing returns with risk.
Hybrid Funds: They provide a blend of stability and growth by investing in both equity and debt.
Avoiding Index Funds and Direct Funds:

Index funds lack active management, which limits flexibility in volatile markets.
Direct funds lack professional guidance, which can make it difficult to meet long-term goals effectively.
Opting for regular funds through a Certified Financial Planner ensures proper management.
Tax Efficiency:

Equity mutual funds have tax benefits if held for the long term.
Under the latest tax rules, long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.
Short-term gains (STCG) are taxed at 20%, making long-term holding more beneficial.
Step 3: Portfolio Allocation for Monthly Income Stability
Equity Allocation:

Allocating around 40-50% to equity-oriented funds can provide long-term growth.
Equity offers potential for higher returns, which helps in beating inflation.
Debt Allocation:

The remaining 50-60% can be invested in debt mutual funds, which provide stability and predictable returns.
Debt funds will reduce risk and make monthly income more predictable.
Reinvesting Dividends:

Choose growth options within funds for better compounding.
An SWP can draw monthly amounts, making reinvestment of dividends unnecessary.
Adjusting for Market Conditions:

Your Certified Financial Planner can help adjust allocation based on market conditions.
This flexibility in allocation is especially valuable during volatile periods.
Step 4: Structured Monthly Income through SWP
Setting Up the SWP:

Begin withdrawals from January 2025 as per your need of Rs 60,000 per month.
Withdrawals can be set at a fixed date each month for consistency.
Protecting Capital:

With careful management, the SWP will sustain monthly income without depleting capital too quickly.
Regular reviews by your Certified Financial Planner will optimise your withdrawal rate to maintain capital longevity.
Step 5: Emergency Fund Allocation
Importance of Liquidity:

It’s vital to keep an emergency fund for unexpected expenses, separate from your investment corpus.
A sum equivalent to 6-12 months of expenses should be set aside in liquid funds or a high-yield savings account.
Avoiding Disruption in SWP:

By keeping an emergency fund, you avoid dipping into your SWP or investment corpus during unexpected times.
Step 6: Monitoring and Rebalancing the Portfolio
Periodic Portfolio Reviews:

Regular monitoring helps ensure the SWP is meeting your monthly income goals.
Market conditions and personal financial needs may shift over time, requiring adjustments.
Rebalancing Asset Allocation:

Rebalancing the equity and debt portions periodically helps maintain the ideal risk-return balance.
Your Certified Financial Planner can assist in rebalancing to preserve capital and income stability.
Step 7: Avoiding Common Pitfalls
Avoid High-Risk Investments:

Avoid aggressive equity investments, which could lead to losses.
Stick to a balanced portfolio that aligns with your risk tolerance.
Not Over-Estimating Withdrawal Rates:

Withdrawing too high an amount each month can deplete capital quickly.
A Certified Financial Planner can calculate a safe withdrawal rate to sustain income long term.
Avoid Direct Investments:

Direct investments lack the guidance and expertise needed for steady income.
Opt for regular funds managed by a Certified Financial Planner for a structured approach.
Step 8: Health and Life Insurance Considerations
Health Insurance Coverage:

As you approach retirement, health insurance becomes essential to cover medical expenses.
Ensure you have a comprehensive plan that meets healthcare needs without impacting your SWP.
Reviewing Life Insurance:

If you hold ULIPs or LIC investment-cum-insurance policies, consider surrendering them for better investment options.
The saved premiums can be reinvested in mutual funds to further support your SWP income.
Step 9: Future Planning Beyond SWP
Retirement Planning:

As you age, inflation will affect purchasing power. Ensure periodic reviews and adjustments to your SWP.
Discuss with your Certified Financial Planner ways to adjust income as expenses increase.
Consider Your Long-Term Needs:

Factor in potential future expenses such as medical costs or travel.
A well-planned SWP will allow flexibility for additional withdrawals if needed.
Final Insights
With a well-planned SWP, you can enjoy a steady income of Rs 60,000 per month without depleting your capital too soon. By choosing the right funds, balancing equity and debt, and consulting a Certified Financial Planner, you’ll achieve consistent income with minimal risk. Periodic reviews and adjustments will ensure your investments stay aligned with your needs, providing peace of mind in retirement.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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  |7255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 06, 2024

Asked by Anonymous - Apr 12, 2024Hindi
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Sir, I am 59 years old, will retire in January 2025, I want to make SWP of Rs.30 lakh so that I can get Rs 20K monthly pension. Which fund I will select and how to invest ?
Ans: As you approach retirement, it's essential to plan for a steady income stream to support your lifestyle. Here's how you can achieve your goal of setting up a Systematic Withdrawal Plan (SWP) to generate Rs. 20,000 monthly pension from a Rs. 30 lakh corpus:

• Given your age and the need for stable income, consider investing in debt mutual funds or conservative hybrid funds.
• These funds typically invest in fixed-income securities like bonds and offer regular income through dividends or SWPs.

• Look for funds with a track record of consistent returns and a focus on capital preservation.
• Conservative debt funds or monthly income plans (MIPs) may be suitable options for generating steady income while minimizing risk.

• Calculate the SWP amount needed to generate Rs. 20,000 monthly pension from your Rs. 30 lakh corpus.
• Consider factors such as expected returns, withdrawal frequency, and fund expenses when determining the SWP amount.

• It's crucial to review your investment portfolio regularly and adjust your SWP amount as needed based on market conditions and your financial goals.
• Consult with a Certified Financial Planner to help you select the appropriate mutual fund and set up the SWP to meet your retirement income needs.

• Ensure you have a contingency fund set aside for emergencies to cover unexpected expenses during retirement.
• Additionally, consider diversifying your retirement income sources, such as annuities or senior citizen savings schemes, for added financial security.

By carefully selecting the right mutual fund and setting up a disciplined SWP strategy, you can create a reliable income stream to support your retirement lifestyle. Stay focused on your financial goals and consult with a financial advisor for personalized guidance tailored to your needs. Best wishes for a happy and fulfilling retirement!

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Ramalingam

Ramalingam Kalirajan  |7255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 21, 2024

Asked by Anonymous - Oct 19, 2024Hindi
Money
Hi Sir, I am 41 years. I have 50 lakhs cash, i want to do swp this amount to get 70k monthly from march 2025. Could you please suggest me how to proceed in this case?.. Thanks
Ans: You are looking for a solution to generate Rs 70,000 monthly using a Systematic Withdrawal Plan (SWP) from Rs 50 lakhs starting in March 2025. Let's explore a few options that will balance regular income needs with potential growth, all within a safe risk framework. Since you have around 5 months until March 2025, it’s important to plan now.

Below is a comprehensive analysis that will help you achieve your goals.

Understanding Your Objective
You have Rs 50 lakhs to invest.

You need Rs 70,000 monthly starting March 2025.

You are 41 years old, which means you have a long financial horizon and can afford a mix of growth and safety.

Medium risk tolerance.

To ensure the monthly withdrawal of Rs 70,000 doesn’t deplete your capital too quickly, a balanced approach is required. Let's consider mutual fund options suited for a medium-risk profile.

Why a Systematic Withdrawal Plan (SWP)?
SWP allows you to withdraw a fixed amount every month while the rest of your investment continues to grow.

This approach avoids keeping the entire amount in a low-interest product like an FD, where inflation will erode the real value.

With SWP, you also get tax efficiency. Your withdrawals are partially treated as capital gains and partially as a return of capital, reducing the tax burden.

Importance of Asset Allocation
Asset allocation is critical to meeting your monthly income needs without depleting your corpus. In your case, you need:

Regular income to start in March 2025.

Growth potential to ensure the capital lasts long-term.

Here’s how you can structure your allocation:

Equity-Oriented Hybrid Funds (60% allocation): These funds provide a mix of equity and debt exposure. They offer the potential for higher returns while keeping risk in check. Equity exposure ensures long-term growth, while the debt portion provides stability.

Debt-Oriented Hybrid Funds (40% allocation): These funds have a higher debt exposure but still provide some equity exposure for growth. The debt portion ensures regular returns and reduces volatility.

This mix gives you both stability and growth to meet your withdrawal goals.

How to Invest
Step 1: Invest the Lump Sum
Since you need to start the SWP in March 2025, the first thing to do is invest the Rs 50 lakhs. You can split this across equity-oriented and debt-oriented hybrid funds. The reason for hybrid funds is that they are less volatile than pure equity funds but still offer growth potential.

Split the Rs 50 lakhs as:

Rs 30 lakhs in equity-oriented hybrid funds.

Rs 20 lakhs in debt-oriented hybrid funds.

The idea is to get the best of both worlds — growth from equity and stability from debt.

Step 2: Set Up the SWP
By the time you start the SWP in March 2025, your investment will have had a few months to generate some growth. The returns from these funds should help in providing your desired monthly withdrawal without depleting the capital too fast.

You can set up an SWP for Rs 70,000 per month. It’s important to keep an eye on the performance of the funds and adjust your withdrawals if necessary. If the markets are down, withdrawing less can help preserve your capital.

Tax Considerations
It is crucial to be aware of the tax implications of SWP withdrawals.

For Equity Funds: If you hold the funds for more than 12 months, the gains are classified as long-term capital gains (LTCG). Currently, LTCG is taxed at 12.5% on gains exceeding Rs 1.25 lakhs per year. Short-term capital gains (STCG) are taxed at 20%.

For Debt Funds: Any gains made after 3 years are considered long-term and taxed at your income slab. Short-term gains are taxed according to your income tax slab as well.

Since SWP withdrawals are treated as a combination of capital gains and return of principal, the tax impact is usually lower than regular income.

Benefits of Actively Managed Mutual Funds
Actively managed mutual funds can be a better option than index funds or direct funds. Here’s why:

Flexibility: Actively managed funds allow fund managers to change the asset allocation based on market conditions. This means they can reduce risk or enhance growth as needed.

Better Performance: Over time, actively managed funds can outperform index funds, especially in a medium-risk scenario like yours, where the objective is to preserve capital while generating regular income.

Professional Management: Having a Certified Financial Planner managing your funds means you benefit from expert knowledge, which can help in maximizing returns and minimizing risks.

Avoid direct funds, as they do not offer the same personalized support that investing through a CFP-certified MFD offers. This support is crucial when dealing with market fluctuations and planning SWP withdrawals.

Keeping Inflation in Mind
Inflation is a key consideration for a medium to long-term withdrawal plan. A monthly withdrawal of Rs 70,000 in 2025 might not hold the same value after 10 or 15 years due to inflation.

You need to regularly review your withdrawals and possibly increase them every few years to keep pace with inflation. This is where actively managed funds help, as they offer growth potential to combat inflation. You can set up a periodic review with your Certified Financial Planner to adjust your SWP as needed.

Regular Monitoring and Review
Once your SWP starts, regular monitoring of the portfolio is essential. Market conditions, fund performance, and your changing needs must all be taken into account. By working with a Certified Financial Planner, you can ensure that your SWP continues to meet your needs without depleting your capital too quickly.

Set up a 6-monthly or annual review of your investment to check the performance.

Adjust the SWP amount based on the market and personal requirements.

Stay flexible. You can reduce withdrawals if the market is down and increase when it's favorable.

Alternatives if SWP Alone Isn’t Sufficient
If you feel that an SWP alone won’t meet your future financial needs, consider the following options:

Increase the Corpus: Adding to your Rs 50 lakh corpus over time will give you more flexibility and safety. You can invest additional amounts in the same funds and set up a larger SWP in the future.

Dividend Payouts: Some hybrid funds also offer dividend payout options. These dividends can supplement your SWP withdrawals, ensuring you meet the Rs 70,000 target each month.

However, dividends are now taxed as per your income tax slab, so SWP is generally a more tax-efficient option.

Preparing for Market Downturns
Since hybrid funds have exposure to equity, there will be some market volatility. It’s important to mentally prepare for market downturns. Here are a few tips:

Do not panic if the market drops temporarily.

Avoid selling the funds prematurely unless necessary.

Keep a buffer of 3-6 months’ worth of expenses in a safer investment like a liquid fund. This will ensure you do not need to withdraw during market corrections.

Having a buffer also gives your investment time to recover if there’s a short-term dip.

Final Insights
Generating Rs 70,000 per month from Rs 50 lakhs is possible with the right strategy. Using an SWP from a combination of equity and debt-oriented hybrid funds can help you achieve your goal while preserving your capital.

It’s important to stay patient, review your investment regularly, and make adjustments as needed. With active fund management and a Certified Financial Planner guiding you, you will have a clear path to generating a reliable monthly income.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

..Read more

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Dr Ashish Sehgal  |107 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Dec 12, 2024

Asked by Anonymous - Sep 05, 2024Hindi
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Dear Dr Ashish, How do I get my 14 year old teenage son to talk to me? He talks less, is either angry or grumpy and rarely discusses anything at home with anyone. Is this behaviour normal? He used to be a talkative child when he was younger. How can I help?
Ans: Let me reassure you that you’re not alone in facing this challenge, and what you describe is quite common in teenagers. The teenage years are a time of immense internal transformation. It's as if your son is building a new version of himself, one brick at a time, and sometimes, in that process, he may feel the need to pull away to figure things out.

You see, as children grow, their world expands. Their focus shifts from being family-centered to exploring who they are in the larger world. This doesn't mean he cares any less about you; it simply means he’s working on something deep within himself—maybe even trying to understand emotions and situations he doesn’t yet have the words for.

Now, instead of trying to make him talk, which might feel like pressure to him, consider this: how can you create an environment where he wants to open up? Imagine if, instead of asking direct questions or expressing concern, you shared a small, non-threatening piece of your world. Maybe a funny story about your day or a memory of when you were his age. Sometimes, starting with something light gives him permission to engage without feeling interrogated.

Another way to open doors is through shared experiences. Teenagers often speak more freely when they're not face-to-face. Maybe a walk or a ride, cooking a meal together, or even playing a video game could become moments where he feels comfortable talking.

And when he does speak, no matter how small the opening, meet him with curiosity, not judgment. If he shares something, reflect it back to him in a way that says, "I hear you, and I value what you're saying." For example, if he mentions feeling frustrated, you could say, "It sounds like something’s been tough for you lately," rather than jumping to advice.

Finally, remind yourself—and him—this is a phase, not a permanent state. He is still that talkative child deep inside, but right now, he's learning to balance his need for independence with the safety of your love. Your steady presence, even when he seems distant, will be his anchor.

You’re already asking the right question, and that shows how much you care. Trust the process, and trust your connection. It’s still there, even in the quiet moments.

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Anu Krishna  |1394 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Dec 12, 2024

Asked by Anonymous - Dec 10, 2024Hindi
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Relationship
Hi I am 50 yrs male married for last 20 yrs, facing domestic abuse mentally, physically from my wife, she is extremely aggressive and use foul language in front of our 13 yrs daughter, family members, friends, maid, driver... she is keep blaming me if anything went wrong be it is financial, Social and economical . She always blame my parents with very abusive language.. she always say negative things in front of my family members for all the things which went wrong due to her extraordinary aggressive and abusive behavior, she always make issues out of normal conversation.. she is also working. She doesn't talk and whenever i try to ignore her, she physically abusive and use foul language with me.. i am trying to adjust with her for the sake of my daughter future. She is very negative, if i try to help her, she will start shouting and use abusive language and start physically abusive towards me I don't know how deal with strange behavior... I am confused and worried, but due family, daughter and society i am tolerating her. Pls help and suggest best possible solutions
Ans: Dear Anonymous,
Has this started more recently or has it been going on for a while now? This is a good indicator to know if things were most;y like this or if any recent event has triggered this.
If it is a recent thing, I guess you could try and find out what exactly could have caused this. But if it is something that has been happening for a long time, the reasons could be any and many. Since there is also some physical abuse as you mentioned, kindly make an appointment with a professional who will be able to guide your wife through this challenging time. It possibly involves some unresolved things from the past which is making life currently difficult for all of you.
Work as a family unit together for her and not against her. It's going to make matters worse. She may refuse to go to a professional, then the only option left is for you to develop a lot of patience and deal with this adult to adult with her. No fights, quarrels with her but a lot of quiet conversations which she will initially resist but someday she will give in...So if you want the family to get back together in a healthy way, a lot also depends on how you are going to deal with the situation.

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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Ramalingam

Ramalingam Kalirajan  |7255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 12, 2024

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Sir, I am a female private company employee would like to invest Rs 10,00,000 other than in FD's. Considering liquidity and risk pls advise me how to proceed with.
Ans: Your decision to explore alternatives to fixed deposits is commendable. It reflects a balanced approach to achieving better returns while maintaining liquidity and managing risk. Below is a detailed analysis and suggestions on how to proceed with your investment:

Diversified Mutual Fund Portfolio
Mutual funds are ideal for liquidity, risk management, and diversification.

Allocate funds to different mutual fund categories based on your risk appetite and investment goals.

Equity mutual funds: Invest 40% for high returns in the long term. They suit moderate to high-risk tolerance.

Hybrid funds: Allocate 30% to balance equity and debt exposure for stability. These are less volatile.

Debt mutual funds: Invest 30% to preserve capital and ensure liquidity. These offer lower risk.

Actively managed funds are better for growth as they outperform passive options.

Regular plans through an MFD with a CFP offer expert guidance and better fund selection.

Systematic Withdrawal Plan (SWP)
Use SWP for a steady cash flow if needed later.

Withdraw systematically without disturbing the principal.

This strategy maintains liquidity and provides tax efficiency.

Corporate Fixed Deposits and Bonds
Invest 20% in AAA-rated corporate FDs or bonds for better returns than bank FDs.

Ensure the issuer has a strong credit rating for safety.

These options provide fixed income and moderate liquidity.

Gold Investment for Diversification
Allocate 10% to gold through Sovereign Gold Bonds or Gold ETFs.

Sovereign Gold Bonds offer an additional annual interest of 2.5%.

Gold acts as a hedge during economic uncertainties.

Liquid Funds for Emergency Needs
Keep 10% in liquid mutual funds for emergencies or short-term goals.

These provide easy access to funds within 24 hours.

Returns are higher than savings accounts, ensuring better cash management.

Tax Efficiency
Equity mutual funds offer long-term tax benefits if held for over one year.

Debt mutual funds are taxed as per your income slab, but indexation reduces long-term taxes.

Plan withdrawals to optimise tax liability and maximise post-tax returns.

Insurance and Contingency Fund
Before investing, ensure adequate health and life insurance coverage.

Maintain a contingency fund covering at least 6 months of expenses.

This step ensures financial stability during emergencies.

Regular Monitoring
Review your investments quarterly with the help of a Certified Financial Planner.

Rebalance the portfolio based on market conditions and financial goals.

Regular tracking helps mitigate risks and ensures alignment with your objectives.

Avoid Common Investment Mistakes
Avoid direct funds due to the absence of expert advice and monitoring.

Stay away from speculative investments promising quick returns.

Avoid underestimating the importance of professional guidance in fund selection.

Align Investments with Goals
Define short-term, medium-term, and long-term financial goals.

Match investments with respective timelines for effective planning.

Ensure liquidity aligns with your specific needs, avoiding over-commitment to illiquid options.

Final Insights
Your investment should be a mix of growth and safety. Keep funds accessible when required while optimising returns. Diversify wisely and seek professional guidance for fund selection and periodic review. Stay focused on aligning investments with your goals and risk profile.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

Anu

Anu Krishna  |1394 Answers  |Ask -

Relationships Expert, Mind Coach - Answered on Dec 12, 2024

Asked by Anonymous - Dec 10, 2024
Relationship
Hi doctor, I am 40 yrs old and my wife is 38 married for 14 yrs and have 1 kid who is 11 yrs old. We both are working and we only get to spend time on weekend and during weekdays we hardly get time to talk and see each other due to our shift timings. During weekend I do get urge to be intimate with her but she has lost interest and she doesn't have that urge to be intimate, we spoke about this multiple times and she agrees about this fact as we hardly get intimate once in 6 months or may be more than that. I do have that strong urge and don't want to cheat on my wife or go somewhere else to fullfill my sexual needs, but not sure if there can be any medication which will arouse her so that she can participate willingly in having sex. Even if we happen to get in to action she will just lie on the bed like dead with no emotions and she is constantly thinking of something else in her mind like what I need to cook for tomorrow, or did she do that work in office she will ask me to remind about something tomorrow as she has to do certain task, her mind is all over the place except in the act in the present moment, which really turns me off. Please need your help to save our relationship.
Ans: Dear Anonymous,
Intimacy for a man and women are very different and varied as well.
You cannot NOT connect during the week at an emotional level and then expect your wife to be excited to jump in bed. That's not how it works!
Both of you work which means weekends do get busy with household chores, children and more...there's very little time and energy left for intimate moments.
On your wife's part, she has not learned as yet to leave office work at the office but certainly what to cook for the next day is a huge task if this depends only on her. Why don't the two of you pitch in to distribute the household work between you? That way she does not feel burdened (if she does feel that way)...this also goes a long way in letting her know that you care and you want to help her...
You could also talk about how you can steal some moments after office and before you reach home by meeting at a cafe and sharing time over a cup of coffee. This definitely will make your wife feel more connected and emotionally secure which is a start point to easing of your sexual relationship.
Basically, get back to the dating scene and make your relationship a priority. A great sexual life is a product of the connection that a couple share outside the bedroom and the willingness on the part of the couple to make that happen.

All the best!
Anu Krishna
Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

...Read more

Ramalingam

Ramalingam Kalirajan  |7255 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 11, 2024

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I have 20 lakhs in my account and a house in my name. At present I am not earning. I have taken SBI Life smart wealth builder with installment of 1Lakh, for 12 years and premium payment term of 7 years. Applicable tax rate is 18%. I also invested in MF and taken a health insurance. I am thinking if it would be wise to continue with the SBI life. If I close SBI life and invest that in MF will it be beneficial for me? I have taken a break from my career due to health issues, and planning to continue with my job soon with an expected income of 40-50k. I am 50 years old. I need to take care of my son's (18 years) higher studies and plan for my retirement.
Ans: You are in a transitional phase with important financial goals. Let’s assess your options to make informed decisions.

Assessing SBI Life Smart Wealth Builder Policy
High Cost of Policy: The policy includes administration charges, fund management fees, and taxes of 18%.

Limited Returns: ULIPs often provide lower returns compared to actively managed mutual funds.

Lock-in Period: Your policy locks funds, restricting liquidity for immediate goals.

Surrender Value: Check the surrender value. Early surrender might lead to penalties and reduced returns.

Potential Benefits of Investing in Mutual Funds
Higher Returns: Mutual funds, especially actively managed ones, often outperform ULIPs over time.

Flexibility: You can withdraw funds based on your needs, offering better liquidity.

Diversification: Mutual funds provide exposure to different asset classes, reducing risk.

Cost Efficiency: Investing through a Certified Financial Planner minimises hidden charges and optimises returns.

Managing Your Rs. 20 Lakh Corpus
Emergency Fund: Set aside Rs. 5-6 lakhs in liquid funds or fixed deposits for emergencies.

Education Planning: Allocate funds in short-term debt mutual funds or recurring deposits for your son’s higher studies.

Retirement Corpus: Invest the remaining amount in a mix of equity and debt mutual funds for long-term growth.

Health Insurance Adequacy: Review your existing health insurance to ensure sufficient coverage.

Planning Your Income Resumption
Once you resume work, save at least 20-30% of your income.

Prioritise retirement contributions alongside education planning.

Use surplus income to reduce financial dependency on investments.

Tax Efficiency
Mutual Funds: Equity mutual funds provide tax benefits but watch for LTCG above Rs. 1.25 lakh (taxed at 12.5%).

Surrendering ULIP: Check tax implications on surrender proceeds. ULIPs offer tax exemption if premiums don't exceed 10% of the sum assured.

Health Insurance: Claim Section 80D deductions for premiums paid.

Strategic Steps Forward
Review the policy surrender value. If penalties are high, consider continuing till break-even.

Consult with a Certified Financial Planner for a detailed portfolio review.

Set realistic timelines for education and retirement goals.

Maintain separate funds for short-term needs and long-term growth.

Finally
Your proactive approach will create a strong financial foundation. By reallocating your resources wisely, you can secure your son’s education and your retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

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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