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Retirement Planning at 40 with 1 Lakh Income: How to Build Wealth?

Ramalingam Kalirajan |8083 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 01, 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 Bipin on Jul 22, 2024Hindi

Hello,I am 40year old.Monthly income is 1Lac so pl tell me how can I create storing wealth after retirement

Ans: Wealth Creation at Retirement
Assessing Your Financial Position

Your income is Rs 1 lakh per month.
You are currently 40, which means you have 20 years before you attain the age of 60 and retire.
There, you need to plan well to ensure a comfortable retirement.
Setting of Financial Objectives:

As defined, your retirement corpus
Estimation of the living expenses on a monthly basis after retirement
Take inflation and rising health into consideration.
Building of Emergency Fund

Save 6 months' worth of expenses in a savings bank account.
It would provide financial security in case of emergency
Division of Your Income

Savings and investments should be 30% to 40%.
That would work out to about Rs 30,000 to Rs 40,000 per month.
Systematic Investment Plan (SIP)

Invest Rs 20,000 to Rs 30,000 per month in mutual funds.
Junk diversified equity funds for growth.
Balanced funds invest in a mix of equity and debt.
Public Provident Fund (PPF)

Invest in PPF for tax-free gains.
Try and invest the maximum every year.
National Pension System (NPS)

Invest in NPS for a regular income post-retirement.
It provides tax benefits under Section 80C and 80CCD.
Health Insurance

Ensure adequate health insurance coverage.
This safeguards your savings from medical emergencies.
Term Insurance

Secure your family's future with term insurance.
Ensure that the sum assured is sufficient to cover your liabilities and family needs.
Diversification of Investments

Invest in a mix of equity, debt, and gold.
Diversification reduces risk and enhances returns.
Regular Review and Adjustments

Review your investments annually.
Adjust based on market performance and life changes.
Increasing SIP Contributions

Increase SIP amount by 10% every year.
This also leads to a larger corpus getting built over some time.
Avoiding Real Estate

The real estate investments can be illiquid.
Financial assets are much better in terms of liquidity, as well as growth.
Avoiding Index Funds and Direct Funds

Index funds may not be able to perform better than actively managed funds.
Direct funds need to be actively managed; regular funds provide for professional management through MFDs with CFP credentials.
Final Insights
Set clear financial goals. Start investing a majority of your income in diversified investments. Periodically review and rebalance your portfolio. Get adequate insurance coverage. Let not life drift by without disciplined investing and periodic reviews. Retire comfortably.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

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