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Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 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
Geo Question by Geo on Apr 16, 2024Hindi
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Hi Dev, I hope you're doing well. I have a question that I think you might be able to assist me with. I'm 52 years old and currently need to plan for my children's education expenses. My elder child's education is ongoing and requires 10 lakhs, while my younger child will require 30 lakhs in two years. Here's a breakdown of my investments: Stocks, Mutual Funds, and Portfolio Management Services amount to 2.6 crores, and I have 40 lakhs in my Provident Fund. I also receive a monthly rent of 2 lakhs. If I estimate my monthly expenses at 1 lakh, do you think I can retire comfortably with this corpus? In the worst-case scenario, I can liquidate one of my properties, which could yield 3 crores. Ideally, I would like to retire without touching my real estate investments. My life expectancy is 85 years. Additionally, I have medical insurance coverage of 12 lakhs plus a top-up of 90 lakhs. I plan to travel twice a year during retirement, with an estimated expenditure of 1.5-2 lakhs per year. I would appreciate your insights on this matter. Thank you, Geo

Ans: Let's delve into your situation and see how we can address your concerns regarding your children's education expenses and retirement planning.

Firstly, it's commendable that you're proactively planning for your children's education. With the elder child's education requiring 10 lakhs and the younger child's needing 30 lakhs in two years, it's crucial to ensure you have sufficient funds set aside for these expenses.

You mentioned having investments in stocks, mutual funds, and Portfolio Management Services amounting to 2.6 crores, along with 40 lakhs in your Provident Fund. Additionally, you receive a monthly rent of 2 lakhs, which significantly contributes to your income.

Considering your monthly expenses are estimated at 1 lakh, and you have a potential fallback option of liquidating one of your properties, which could yield 3 crores, it seems you have a robust financial foundation.

With your life expectancy being 85 years and adequate medical insurance coverage, coupled with your retirement plans of traveling twice a year with estimated expenditures, you seem well-prepared for retirement.

However, it's essential to ensure that your investment portfolio is diversified and aligned with your risk tolerance and long-term goals. Regularly review your investments and make adjustments as necessary to stay on track.

Overall, it appears that you're in a good position to retire comfortably and fulfill your financial goals. If you have any further questions or need assistance in fine-tuning your financial plan, feel free to reach out. Wishing you all the best!
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  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 2024

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Hi Advait, I hope you're doing well. I have a question that I think you might be able to assist me with. I'm 52 years old and currently need to plan for my children's education expenses. My elder child's education is ongoing and requires 10 lakhs, while my younger child will require 30 lakhs in two years. Here's a breakdown of my investments: Stocks, Mutual Funds, and Portfolio Management Services amount to 2.6 crores, and I have 40 lakhs in my Provident Fund. I also receive a monthly rent of 2 lakhs. If I estimate my monthly expenses at 1 lakh, do you think I can retire comfortably with this corpus? In the worst-case scenario, I can liquidate one of my properties, which could yield 3 crores. Ideally, I would like to retire without touching my real estate investments. My life expectancy is 85 years. Additionally, I have medical insurance coverage of 12 lakhs plus a top-up of 90 lakhs. I plan to travel twice a year during retirement, with an estimated expenditure of 1.5-2 lakhs per year. I would appreciate your insights on this matter. Thank you, Geo
Ans: Hello Geo, I'm doing well, thank you for asking. It sounds like you have several factors to consider in your retirement planning, especially regarding your children's education expenses and your retirement goals.

With your investments totaling 2.6 crores in stocks, mutual funds, and portfolio management services, along with 40 lakhs in your Provident Fund and a monthly rent of 2 lakhs, you seem to have built a substantial corpus for retirement. Additionally, having the option to liquidate one of your properties for 3 crores provides flexibility in case of unforeseen circumstances.

Considering your monthly expenses of 1 lakh, your retirement income from investments and rental income should comfortably cover your basic needs. Your medical insurance coverage also seems robust, which is crucial for maintaining financial security during retirement.

However, it's essential to account for inflation and potential fluctuations in investment returns. While your current investments may suffice for your retirement needs, periodic reassessment and adjustments may be necessary to ensure your financial security throughout retirement.

Regarding your children's education expenses, it's commendable that you've earmarked funds for their education. By carefully planning the timing and allocation of these expenses, you can minimize the impact on your retirement corpus.

Your estimated travel expenses during retirement are reasonable and can be accommodated within your budget.

Overall, with prudent financial management and careful planning, it seems feasible for you to retire comfortably without touching your real estate investments. However, consulting with a Certified Financial Planner can provide personalized insights and recommendations tailored to your specific financial situation and goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 26, 2024

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Money
Hi Sir, I hope you're doing well. I have a question that I think you might be able to assist me with. I'm 52 years old and currently need to plan for my children's education expenses. My elder child's education is ongoing and requires 10 lakhs, while my younger child will require 30 lakhs in two years. Here's a breakdown of my investments: Stocks, Mutual Funds, and Portfolio Management Services amount to 2.6 crores, and I have 40 lakhs in my Provident Fund. I also receive a monthly rent of 2 lakhs. If I estimate my monthly expenses at 1 lakh, do you think I can retire comfortably with this corpus? In the worst-case scenario, I can liquidate one of my properties, which could yield 3 crores. Ideally, I would like to retire without touching my real estate investments. My life expectancy is 85 years. Additionally, I have medical insurance coverage of 12 lakhs plus a top-up of 90 lakhs. I plan to travel twice a year during retirement, with an estimated expenditure of 1.5-2 lakhs per year. I would appreciate your insights on this matter. Thank you, Geo
Ans: Firstly, it's heartening to see your foresight in planning for your children's education and thinking ahead towards retirement. Your financial situation seems quite robust, and you've made commendable progress with your investments.

Let's delve into your retirement planning. With a corpus of 2.6 crores in stocks, mutual funds, and Portfolio Management Services, along with 40 lakhs in Provident Fund, you have a substantial base. Adding your monthly rent of 2 lakhs and estimating monthly expenses at 1 lakh, your current financial position appears promising.

Considering your monthly rental income and your expenses, you seem to have a surplus that could be redirected towards your children's education and retirement corpus. However, it's essential to factor in inflation and potential market fluctuations.

Your medical insurance coverage looks solid, providing a safety net for unforeseen medical expenses. Moreover, your travel plans are well within reach, considering your retirement aspirations.

Given your life expectancy of 85 years, you'll need to ensure that your corpus lasts throughout your retired life. With prudent planning and regular reviews, it's possible to achieve a comfortable retirement without liquidating your real estate investments.

Here are some suggestions:

Education Corpus: Allocate funds specifically for your children's education to ensure timely payments.
Retirement Corpus: Continue to invest and diversify your portfolio to beat inflation and safeguard against market volatility.
Real Estate: If possible, retain your properties as a safety net or as a source of passive income.
It would be beneficial to have a detailed one-on-one discussion with a certified financial planner to create a tailored financial roadmap for you. You can explore various scenarios, optimize your investment strategy, and ensure you retire comfortably without compromising on your aspirations. Please feel free to reach out to me for any follow-up questions.

..Read more

Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

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

Asked by Anonymous - Jun 01, 2024Hindi
Money
Hi, I am a 44 year old IT professional, married with no kids, and I'm planning to retire from active work by 46 (with an option to pick up some freelance engagements). Few basic information are as below: 1. 3 houses paid for, worth approx INR 5.5 Cr 2. Cumulative FD worth INR 2 Cr, split between myself & spouse 3. NPS worth INR 13 lakhs 4. MF portfolio worth approx INR 40 lakhs 5. Medical insurance with a cumulative coverage of INR 1.5 Cr, for self & spouse. 6. Parents are not financially dependent on me. 7. Current monthly expenses are around INR 1.5 lakh. 8. Annual holiday pegged at INR 20 lakhs 9. No rental yield from the houses, as they're self occupied I will continue to save/invest approx INR 6.5 lakh per month till my retirement date, which is tentatively set for mid 2026. My questions are as below: 1. Assuming I have a net savings/investment of INR 4 Cr, along with the 3 houses, will it lead to a sufficient retirement corpus. 2. If I need to continue living a similar lifestyle, how much will I need as a corpus. Thanks in advance.
Ans: Retirement planning is crucial, especially when you're aiming to retire early and maintain a comfortable lifestyle. Let's delve into a comprehensive analysis of your financial situation and create a strategy to ensure a secure and enjoyable retirement.

Understanding Your Current Financial Situation
Assets and Investments

Three Houses: Worth approximately Rs. 5.5 crore. These are self-occupied and provide no rental income.
Fixed Deposits: Totaling Rs. 2 crore, split between you and your spouse.
National Pension System (NPS): Worth Rs. 13 lakh.
Mutual Fund Portfolio: Valued at around Rs. 40 lakh.
Medical Insurance: Coverage of Rs. 1.5 crore for you and your spouse.
Current Expenses

Monthly Expenses: Rs. 1.5 lakh.
Annual Holiday Expenses: Rs. 20 lakh.
Savings and Investments Until Retirement

You will save and invest Rs. 6.5 lakh per month until mid-2026.
Evaluating Your Retirement Corpus Requirements
Estimation of Required Corpus

To estimate your retirement corpus, we need to consider your current expenses, inflation, and your expected lifespan. Let's break this down step by step.

Monthly Expenses: Rs. 1.5 lakh.
Annual Expenses: Rs. 1.5 lakh x 12 = Rs. 18 lakh.
Annual Holiday Expenses: Rs. 20 lakh.
Total Annual Expenses: Rs. 18 lakh + Rs. 20 lakh = Rs. 38 lakh.
Accounting for Inflation
Inflation reduces the purchasing power of money over time. Assuming an average inflation rate of 6% per annum, we need to estimate your future expenses.

Calculating Future Expenses
You are currently 44 and plan to retire at 46. Let's assume you live till 85, giving us a retirement period of 39 years.

Future Value of Annual Expenses: Rs. 38 lakh will increase due to inflation.

So, your annual expenses at the start of retirement will be approximately Rs. 42.7 lakh.

Total Corpus Required
To maintain a similar lifestyle throughout your retirement, we need to calculate the corpus required to support these expenses, adjusted for inflation over 39 years.

Considering Withdrawal Rate
A common rule of thumb is the 4% withdrawal rate, which suggests you can withdraw 4% of your retirement corpus annually without depleting it prematurely.

Corpus Required for First Year Expenses:

you need approximately Rs. 10.67 crore at the start of your retirement.

Analyzing the Gap
Required Corpus: Rs. 10.67 crore.

Projected Corpus by Retirement: Rs. 4.48 crore.

Gap: Rs. 10.67 crore - Rs. 4.48 crore ≈ Rs. 6.19 crore.

Strategies to Bridge the Gap
Optimizing Investments

Reallocate Assets: Shift some FD and mutual funds into higher growth options like equity mutual funds. This can potentially provide higher returns.

Increase Savings Rate: If possible, increase your monthly savings rate.

Extend Retirement Date: Consider extending your retirement by a few years to accumulate a larger corpus.

Detailed Investment Strategies

Equity Mutual Funds
Investing in equity mutual funds offers growth potential. These funds can provide returns that beat inflation over the long term. Focus on large-cap and diversified equity funds to manage risk.

Hybrid Mutual Funds
Hybrid funds offer a balanced approach, combining equity and debt. They provide growth with reduced volatility. These can be a good addition to your portfolio for stability and growth.

Debt Mutual Funds
Debt funds are less volatile and provide stable returns. They are suitable for preserving capital and generating regular income. Include a mix of short-term and medium-term debt funds.

National Pension System (NPS)
Continue contributing to NPS. It offers tax benefits and market-linked returns. At retirement, use a portion for annuities and withdraw the rest.

Realign Fixed Deposits
Consider moving a portion of your fixed deposits to mutual funds or other growth-oriented investments. FDs offer safety but lower returns compared to mutual funds.

Medical Insurance Coverage
Your medical insurance coverage of Rs. 1.5 crore is sufficient. Ensure it continues post-retirement. Consider adding top-up plans if needed.

Regular Review and Rebalancing
Regularly review your investment portfolio. Rebalance it to maintain the desired asset allocation. Adjust based on market conditions and your financial goals.

Risk Management
Emergency Fund

Maintain an emergency fund equivalent to 6-12 months of expenses. This ensures liquidity for unforeseen expenses.

Diversification

Diversify your investments across asset classes to reduce risk. Avoid putting all your money in one type of investment.

Monitoring Expenses
Track Expenses

Keep track of your expenses. Adjust your budget if needed to ensure you stay within your retirement income.

Manage Lifestyle Inflation

Be cautious of lifestyle inflation. As your income grows, avoid unnecessary expenses that can erode your savings.

Tax Planning
Tax-Efficient Withdrawals

Plan your withdrawals to minimize tax liability. Use systematic withdrawal plans (SWP) from mutual funds for regular income.

Utilize Tax Benefits

Take advantage of tax-saving investments under Section 80C, 80D, and other applicable sections. This reduces your taxable income.

Freelance Engagements
Consider freelance work post-retirement. It can provide additional income and keep you engaged. This can reduce the pressure on your retirement corpus.

Conclusion
Retirement planning requires careful analysis and strategy. With your current savings and planned investments, you're on the right track. By optimizing your investments, increasing savings, and managing expenses, you can build a sufficient retirement corpus.

Ensure regular review and rebalancing of your portfolio. Work with a Certified Financial Planner (CFP) to tailor your strategy and achieve your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Moneywize

Moneywize   |122 Answers  |Ask -

Financial Planner - Answered on Jun 25, 2024

Asked by Anonymous - Jun 13, 2024Hindi
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Ours is a family of 3 people -- My wife, I and my daughter who is 15. I am 39, my wife is 37 and our monthly expenses are Rs 90K. I own my house and expect to have no fixed income after 65 years, and expect to live till 75. Considering the ever increasing price rise what should be my corpus at 65 for me to continue living the life style I am living today?
Ans: Calculating your retirement corpus:

Here's how to estimate the corpus you'll need to maintain your current lifestyle after retirement:

1. Retirement period:

You plan to retire at 65 and expect to live till 75. So, your retirement period is 75 - 65 = 10 years.

2. Inflation adjustment:

You've rightly considered inflation. To estimate future expenses, we need to factor in inflation. A safe assumption for India is 5-7% inflation. Let's take an average of 6%.

3. Current monthly expenses:

You spend Rs 90,000 per month currently.

4. Future monthly expenses:

To find the monthly expense at retirement (at 65), we need to consider inflation for 26 years (39 years till retirement + 10 years retirement).

You can use an inflation calculator online or a simple formula:

Future monthly expense = Current monthly expense * (1 + Inflation rate)^number of years

In your case, Future monthly expense = Rs 90,000 * (1 + 0.06)^26 ≈ Rs 3,28,550 (approximately Rs 3.29 lakh)

5. Total corpus calculation:

Now you can calculate the total corpus needed. Here's a common approach:

Total corpus = Monthly expense * Number of years in retirement * 12 (months)

However, this method doesn't consider the fact that you'll be withdrawing money every month, reducing the corpus. A more accurate method is using the Time Value of Money (TVM) concept. There are online TVM calculators or Excel functions you can use.

Here's an alternative approach that provides a reasonable estimate:

Multiply the future monthly expense (Rs 3.29 lakh) by a factor considering inflation over the period. This factor can vary depending on your risk tolerance and investment strategy. A factor of 200 is often used as a conservative estimate.
Total corpus = Rs 3.29 lakh/month * 200 (factor) = Rs 6.58 crore (approximately Rs 658 million)

Additional factors to consider:

• Daughter's future expenses: Your daughter will be an adult by the time you retire. While she won't be financially dependent, consider any potential future support you might want to provide for her education or marriage.
• Healthcare costs: Healthcare expenses tend to increase with age. Factor in potential medical needs during retirement.
• Debt: If you have any outstanding debt by the time you retire, you'll need to account for its repayment in your corpus calculation.
• Investment returns: The corpus amount assumes a certain rate of return on your investments. Research different investment options and their potential returns to refine your calculations.

Recommendation:

Consult a financial advisor for a personalised retirement plan considering your specific financial situation, risk tolerance, and investment goals. They can help you create a more comprehensive plan and suggest suitable investment strategies to achieve your corpus target.

Remember, this is an estimate. Regularly review your plan and adjust it based on changing circumstances.

...Read more

Mayank

Mayank Chandel  |1003 Answers  |Ask -

IIT-JEE, NEET-UG, SAT, CLAT, CA, CS Exam Expert - Answered on Jun 24, 2024

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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