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Ramalingam Kalirajan |9854 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2025

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 - Jun 26, 2025Hindi

Hello, I'm 41 years old. My net takeaway per month is 1L and have about 20L as savings. My gola is to retire in the next 10-12 years and hope to have a corpus of about 6-7 years. As of now I'm only paying a car loan EMI (20%) and 40% of my income is invested in SIP which I am to step up by 10-15% every year. Rest is spent Kindly help.

Ans: ? Current Financial Snapshot
– You are 41 years old and earn Rs. 1 lakh per month.
– You are currently paying a car loan EMI, which is about 20% of your income.
– 40% of your monthly income is going into SIPs.
– You are planning a 10-15% yearly step-up in SIP contributions.
– You have savings of around Rs. 20 lakh.
– You wish to retire in 10–12 years with a retirement corpus of Rs. 6–7 crore.

? Retirement Target vs Time Frame
– You are targeting Rs. 6 to 7 crore in 10–12 years.
– This is a strong and ambitious goal.
– It needs very disciplined investing with consistent step-ups.
– Higher inflation will impact post-retirement expenses.
– Hence, the actual need may exceed this estimate.

? Assessment of Your Current Strategy
– 40% monthly savings rate is excellent at this stage.
– Your step-up strategy will boost the corpus effectively.
– Rs. 20 lakh in savings provides a decent foundation.
– Your car loan EMI is manageable but must be closed early.
– With no mention of PF or PPF, this area can be optimised further.

? Actionable Strategy for Next 10 Years

Step 1: Categorise Your Goals
– Your retirement goal is 10–12 years away.
– Break it into 3 parts: short, medium, and long term.
– Don’t ignore medium goals like health corpus, vacation, or big expenses.
– Even emergency fund maintenance must stay consistent.

Step 2: Allocate Savings Wisely
– Equity mutual funds should be 65–70% of your portfolio.
– Remaining 30–35% can be in debt-oriented instruments.
– Actively managed mutual funds are preferred over index funds.
– Index funds are rigid, underperform in corrections, and lack tactical exits.
– Professional fund managers help you manage volatility better.
– Stay invested through regular funds via MFD and Certified Financial Planner.
– Direct funds lack continuous monitoring.
– You may underperform without proper exit or switch triggers.
– SIPs via MFDs bring discipline, review, and optimisation.

Step 3: Strengthen Emergency Fund
– You must have at least 6 months of expenses in a liquid fund.
– Do not rely solely on savings account balances.
– Emergency money must be kept separately and be easily accessible.

Step 4: Close the Car Loan Strategically
– Try closing your car loan in the next 12–18 months.
– Avoid taking new loans unless it is a dire need.
– Interest cost on car loan weakens your overall wealth creation.
– Redirect EMI amount towards long-term SIP once closed.

Step 5: Increase SIP Yearly Without Fail
– 10–15% yearly increase will help you beat inflation impact.
– Review fund performance every year through your MFD.
– Switch underperformers only with proper analysis.
– Maintain diversification across large, mid, small, and flexi cap categories.

Step 6: Build a Medium-Term Corpus
– Keep some investments for 3–5 year goals.
– Hybrid or balanced funds can suit this need.
– Do not keep all surplus for only retirement.
– Life will bring new needs and priorities.
– Better to stay prepared.

? Importance of Goal Clarity
– You must write down your post-retirement needs.
– Identify monthly income required after 12 years.
– Factor in inflation at 6–7% annually.
– Decide how you will withdraw from the corpus.
– Plan SWP (systematic withdrawal plan) strategy in future.
– Choose tax-efficient withdrawal instruments post-retirement.

? Insurance Review is Important
– Ensure you have at least 15 to 20 times your annual income as term cover.
– Term insurance is not for return.
– It protects your spouse and dependents if any.
– Mediclaim should be separate from employer policy.
– One personal health cover must always be active.
– Review critical illness or accident riders as well.

? Tax Planning and New Rules on Mutual Funds
– Plan exit from equity funds only when required.
– LTCG over Rs. 1.25 lakh taxed at 12.5%.
– Short term gains in equity funds taxed at 20%.
– Debt mutual funds taxed as per income slab.
– Rebalance only if asset allocation drifts too much.
– Don’t switch based on market noise.

? Estate Planning Preparation
– Prepare a will once your assets grow.
– Add your spouse as nominee in all investments.
– Don’t ignore this step even if assets look small today.
– Over time, this builds confidence and reduces future issues.

? Avoid Risky or Non-Productive Instruments
– Don’t consider annuities or endowment policies.
– They give poor returns and limit liquidity.
– If you have any LIC, ULIP or investment-linked insurance, surrender it.
– Reinvest proceeds in good equity funds.
– Wealth grows better in mutual funds.

? Future Salary Hikes and Surplus Deployment
– Increase SIP amount with every increment.
– Don’t let lifestyle creep eat up the surplus.
– Assign new goals to each new surplus.
– This builds financial discipline.
– Prioritise retirement over temporary lifestyle desires.

? Asset Allocation as You Near Retirement
– At age 48–50, reduce equity slowly.
– Shift 10% every year towards hybrid or debt funds.
– This ensures less volatility during withdrawals.
– Don’t be fully into equity when you retire.
– A stable income plan requires low volatility.

? Passive Income Post-Retirement
– Build an income bridge with hybrid or dividend-yielding funds.
– Start SWP from these funds post retirement.
– Withdraw only 4–5% of corpus per year.
– This protects principal and grows it slowly.
– Don't depend only on rent or FDs.

? Investment Tracking & Annual Review
– Review your portfolio every 6 to 12 months.
– Discuss with Certified Financial Planner regularly.
– Ensure fund categories don’t overlap.
– Stick to long-term goals.
– Avoid panic during market corrections.
– Keep a watch on inflation-adjusted returns.

? Best Practices for Long-Term Wealth
– Automate SIPs and forget short-term noise.
– Track, but don’t react emotionally to market swings.
– Maintain consistent investments even during job shifts.
– Share financial goals with your spouse.
– Keep all financial documents organised.
– Keep digital records safely with access to spouse.

? Finally
– You have started at the right age for retirement planning.
– Your savings ratio and step-up plan is very good.
– Focus on asset allocation and fund quality.
– Avoid risky decisions or one-time bets.
– Stick to your plan and review it regularly.
– Stay patient. Wealth grows slow but steady with right planning.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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