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Ramalingam Kalirajan |8013 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 23, 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

Question by Krishna on May 20, 2024Hindi

Good day sir. I am 45 years old earning a take home salary of 1.5Lakhs/ month. I also get a rent of Rs. 25K/ month. I have EPF of about 16 Lakhs, NPS of 4 Lakhs, PPF of 3 Lakhs, Have FD of 70 Lakhs, Mutual fund and stocks of 20 Lakhs. Also invested in Gold and the current value is 60 Lakhs. I have some retirement plans with current value of around 20 Lakhs. I have my own house and no need to pay rent. My current expenses of my family is around 60K/ month. I have few plots available which values to around Rs. 1.5 Crore. Can I sell the plot and invest the money as part of my retirement plan. Also I am Planning to retire after 8 years. What investments I need to make to have a peaceful retirement. Waiting for your advice.

Ans: Crafting Your Retirement Plan: A Comprehensive Approach

Hello! Thank you for entrusting me with the task of charting out your retirement journey. Let's delve into your current financial landscape and outline a strategy to ensure a peaceful retirement for you.

Assessment of Current Financial Status

Before we dive into the specifics of your retirement plan, let's take stock of your existing assets and liabilities. You're 45 years old, with a monthly take-home salary of ?1.5 lakhs and an additional rental income of ?25,000 per month. Your investments include:

EPF: ?16 lakhs
NPS: ?4 lakhs
PPF: ?3 lakhs
FDs: ?70 lakhs
Mutual Funds and Stocks: ?20 lakhs
Gold: ?60 lakhs
Retirement Plans: ?20 lakhs
Property Holdings (Plots): Valued at ?1.5 crores
Own House (No Rent Expense)
Monthly Family Expenses: ?60,000
Analyzing the Proposal to Sell the Plot

Considering your upcoming retirement in 8 years and your desire for a peaceful post-retirement life, let's evaluate the proposal to sell the plot and reinvest the proceeds into your retirement plan.

Pros of Selling the Plot:

Liquidity: Selling the plot would provide you with a significant influx of liquidity, which can be channeled into investment avenues with potential for growth and income generation.
Diversification: By diversifying your portfolio away from real estate, you can reduce concentration risk and enhance the overall stability of your investment portfolio.
Simplified Management: Real estate holdings often require active management and incur maintenance costs. Liquidating the plot would eliminate these hassles and streamline your financial affairs.
Cons of Selling the Plot:

Opportunity Cost: The decision to sell the plot involves foregoing potential future appreciation in property value. It's essential to weigh this opportunity cost against the benefits of diversification and liquidity.
Transaction Costs: Selling real estate typically entails transaction costs such as brokerage fees, stamp duty, and capital gains tax, which can impact your net proceeds from the sale.
Emotional Attachment: Real estate holdings often carry emotional significance, and parting with a property may evoke sentimental considerations that should be carefully weighed against financial objectives.
Retirement Planning Strategy

Now, let's outline a retirement planning strategy tailored to your unique circumstances and aspirations.

1. Goal Setting:

Define your retirement goals in terms of lifestyle aspirations, travel plans, healthcare needs, and any other post-retirement objectives you wish to accomplish.

2. Asset Allocation:

Allocate your investable assets across various asset classes such as equity, debt, and alternative investments, considering your risk tolerance, time horizon, and financial goals.

3. Investment Diversification:

Diversify your investment portfolio across multiple asset classes and investment vehicles to mitigate risk and enhance long-term returns.

4. Tax Planning:

Optimize your tax liabilities by leveraging tax-efficient investment avenues and retirement savings instruments such as NPS, PPF, and tax-saving mutual funds.

5. Regular Review and Rebalancing:

Periodically review your investment portfolio to ensure alignment with your retirement goals and risk appetite. Rebalance your portfolio as necessary to maintain the desired asset allocation.

Conclusion

In conclusion, while selling the plot may offer short-term liquidity and diversification benefits, it's essential to carefully weigh the pros and cons before making a decision. With a comprehensive retirement planning strategy encompassing goal setting, asset allocation, investment diversification, tax planning, and regular review, you can pave the way for a peaceful and financially secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

Asked on - May 24, 2024 | Answered on May 24, 2024

Dear Sir, Thanks for your response. I am expecting a monthly income of Rs. 1 Lakh post retirement. Currently I am getting a rent of Rs. 25K and interest from FD of 45K which comes to around 70K. Apart from this I get 10K from plantation. So overall currently I am getting 80K which I am re-ivesting in FD's and MF's. Currently I am investing 1.3Lakh/month. I will be investing the same money for the next 8 years. Whether this will be sufficient to reach my retirement goal of Rs. 1 Lakh/month. Apart from this I have taken medical insurance coverage of Rs. 10 Lakh which I am paying from last 15 years and Term insurance of Rs. 1 Crore which will cover my family until my age becomes 65. Based on your valuable advice I have decided not to sell my plots currently and will look into it later during my post retirement dates. Waiting for your response. Regards, Krishna

Ans: Your prudent approach towards retirement planning is commendable. Given your current investment strategy and consistent monthly contributions, it's likely that you'll achieve your retirement goal of Rs. 1 Lakh per month.

However, it's crucial to periodically review and adjust your investment portfolio to ensure it remains aligned with your financial objectives. Your decision to retain your plots for future consideration reflects careful planning and foresight.
Continue to monitor your investments closely and seek professional guidance as needed to optimize your retirement strategy. Best wishes for a financially secure retirement journey!

Best Regards,

Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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