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42 Year Old with 1.7L Salary: How Much Do I Need for Retirement?

Ramalingam

Ramalingam Kalirajan  |8600 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 19, 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 - Jul 09, 2024Hindi
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Hello i am 42 year old. Earning 1.7L in hand per month. Invests 80k into mutual funds and do NPS 50k yearly and 1.5L into PPF. Have an emi of flat loan 17k per month, out of which 10k is rented income (7k is net damage). We are living in another own house. Wife is also working and her salary is suffi ient enough for monthly expenses and kid's education, and to fulfill her 80C investments. Have got 2 crore term inssurance for myself. Have approx 70L in FD. Want to know how much should be our retirement corpus to cover both. We live in small jaipur and have monthly expenses of approx 35k. Shall we invest further in purchasing land or keep increasing in mutual funds

Ans: Current Financial Snapshot

Age: 42 years
Monthly Income: Rs 1.7 lakh (in hand)
Monthly EMI: Rs 17,000 (net expense Rs 7,000 after rent)
Mutual Fund Investment: Rs 80,000 per month
NPS: Rs 50,000 annually
PPF: Rs 1.5 lakh annually
Term Insurance: Rs 2 crore
Fixed Deposits: Rs 70 lakh
Monthly Expenses: Rs 35,000
Wife's Income: Covers monthly expenses and 80C investments
Own House: Living in
Financial Goals

Retirement Corpus: Secure enough funds for retirement.
Investment Strategy: Optimize current investments for growth.
Step-by-Step Plan

1. Emergency Fund

Maintain at least 6 months of expenses in an easily accessible account.
Target: Rs 2.1 lakh (6 x Rs 35,000)
Ensure liquidity for unexpected needs.
2. Calculate Retirement Corpus

Expenses Estimation: Current monthly expenses of Rs 35,000.
Inflation Adjustment: Assuming 6% inflation rate for future expenses.
Retirement Period: Assume 25 years post-retirement.
Use an online retirement corpus calculator to get a precise figure. However, a rough estimate for a moderate lifestyle might be around Rs 3-4 crore.

3. Investment Strategy

Mutual Funds

Continue investing Rs 80,000 per month in mutual funds.
Diversify across large-cap, mid-cap, and multi-cap funds.
Review and rebalance your portfolio annually.
Public Provident Fund (PPF)

Continue the annual investment of Rs 1.5 lakh in PPF.
This ensures safe, tax-free returns.
National Pension System (NPS)

Contribute Rs 50,000 annually to NPS.
Choose an aggressive mix of equity and debt for higher returns.
Fixed Deposits

Consider moving some FDs to mutual funds for higher growth.
Keep some FDs for short-term goals and liquidity.
4. Avoid Real Estate Investments

Real estate can be illiquid and may not provide consistent returns.
Focus on increasing investments in mutual funds for better growth and liquidity.
5. Insurance

Ensure you have adequate health insurance coverage for the family.
Review your term insurance periodically to cover any gaps.
6. Retirement Planning Steps

Increase SIPs: Gradually increase your SIPs in mutual funds as your income grows.
Diversification: Maintain a diversified portfolio to spread risk.
Review Regularly: Check your investment portfolio annually and make necessary adjustments.
Tax Planning: Optimize investments to maximize tax benefits under sections like 80C, 80D, and 80CCD.
Example Monthly Allocation:

Mutual Funds: Rs 80,000
PPF: Rs 12,500 (monthly equivalent of Rs 1.5 lakh annually)
NPS: Rs 4,167 (monthly equivalent of Rs 50,000 annually)
Emergency Fund: Rs 5,000 (if not fully funded yet)
Final Insights

Building a robust retirement corpus requires disciplined investing and smart financial planning. Focus on maximizing your mutual fund investments, utilizing tax-saving options, and maintaining adequate insurance coverage. Regularly review your financial plan to stay on track and adjust as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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  |8600 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 19, 2024

Asked by Anonymous - Jun 10, 2024Hindi
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Hi, My age is 43yrs and current investments are PF and PPF: 1.5cr, Mutual funds: 90Lakhs, Direct Stocks: 25lakhs, Fixed deposits: 40 lakh, SGB: 5 lakhs, Cash:40 Lakhs. Liabilities: Home EMI: 49,000 per month, kids education: 45,000 per month and other expense:45,000. Surplus of 1 lakh. I like to retire in 10 years. How much corpus do I need at the time of retirement. Liabilities: 2 Kids will complete 12the class in 6 years And then their marriage.
Ans: You are 43 years old with diverse investments. You aim to retire in 10 years. Your financial details are as follows:

Provident Fund (PF) and Public Provident Fund (PPF): Rs. 1.5 crore
Mutual Funds: Rs. 90 lakh
Direct Stocks: Rs. 25 lakh
Fixed Deposits (FDs): Rs. 40 lakh
Sovereign Gold Bonds (SGB): Rs. 5 lakh
Cash: Rs. 40 lakh
Liabilities and Expenses
Home EMI: Rs. 49,000 per month
Kids’ Education: Rs. 45,000 per month
Other Expenses: Rs. 45,000 per month
Total Monthly Expenses: Rs. 1,39,000
Surplus Income: Rs. 1 lakh per month
Your children will complete their 12th grade in 6 years and then have expenses for higher education and marriage.

Assessing Retirement Corpus Needs
1. Estimate Monthly Expenses Post-Retirement:

Assuming you maintain a similar lifestyle post-retirement.
Inflation-adjusted monthly expenses might increase.
Consider an inflation rate of 6% per year.
2. Calculate Retirement Corpus:

Calculate the amount needed to generate the required monthly income.
Factor in inflation and life expectancy (e.g., up to age 85).
Investment Strategy
1. Pay Off Liabilities:

Prioritize paying off the home loan before retirement.
This will reduce your monthly expenses significantly.
2. Build a Diversified Portfolio:

Continue with diversified investments in mutual funds, stocks, and bonds.
Consider increasing investments in mutual funds for growth.
Allocate a portion of your surplus to equity and debt funds.
3. Set Up Systematic Investment Plans (SIPs):

Use your monthly surplus of Rs. 1 lakh to set up SIPs.
Focus on equity mutual funds for higher long-term returns.
Consider balanced funds for a mix of growth and stability.
4. Emergency Fund:

Maintain an emergency fund to cover 6-12 months of expenses.
Keep this in a liquid and safe investment like a savings account or short-term FD.
5. Child Education and Marriage Fund:

Start a dedicated fund for your children’s education and marriage.
Use a mix of equity and debt mutual funds for this goal.
Adjust the allocation as you get closer to the need.
6. Review and Adjust Investments:

Review your portfolio every six months.
Adjust based on performance and changing needs.
Ensure you are on track to meet your retirement and other financial goals.
Retirement Corpus Calculation
1. Estimate Future Monthly Expenses:

Current monthly expenses: Rs. 1,39,000
Adjusted for inflation over 10 years (at 6% per year).
2. Calculate Required Corpus:

Use a retirement calculator to estimate the corpus.
Factor in life expectancy, inflation, and expected returns on investments.
Additional Tips
1. Tax Efficiency:

Choose investments that offer tax benefits.
Consider tax-efficient mutual funds and debt instruments.
2. Adequate Insurance:

Ensure you have sufficient health and life insurance.
Review your policies to ensure they meet your needs.
3. Regular Monitoring:

Stay disciplined with your investments.
Regularly monitor and rebalance your portfolio.
Final Insights
To retire comfortably in 10 years, you need a substantial corpus. Continue your diversified investment strategy, focus on growth, and pay off your liabilities. Use your monthly surplus wisely to build a robust retirement fund. Regularly review and adjust your investments to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8600 Answers  |Ask -

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

Money
Hi my name is Somani, I have completed 39 years and planning to retire in my career, below are my current financial situation. Saving account: 5 Lac FD: 15 Lac, all maturing in 2026 Mutual fund: 28 Lac (current value: 36 Lac, Large cap: 50%, Mid cap: 26%, Small cap: 22%, Other: 2%) Gold Bonds: 3.5 Lac (current value: 6.85 Lac) Equity share: 26 Lac (current value: 47 Lac) NPS: current value: 6 Lac EPFO: 12.25 Lac PPF: 7.67 Lac Term Plan: 1 Cr Pension Plan after 60: 30k approx monthly Health insurance: 13 Lac whole family My wife is working and gets around 70k in hand Having one daughter, age is 8 year and studying in 2nd class My father is retired and below are his financial situation Pension: 45k approx per month FD: 1 cr Equity Share/Mutual fund/ Gold bonds: 1 cr approx Property: 80 Lac approx current valuation Own House: 1.75 cr - 2 cr current valuation Rental income: 18k approx per month Please guide me on above data, how much corpus I should have to have a peaceful retirement considering my current monthly expense around 1.25 Lac per month.
Ans: You have a strong and diverse financial foundation. Let us analyse it comprehensively.

Liquid Assets
Savings account balance of Rs 5 lakh offers immediate liquidity.

Fixed deposits worth Rs 15 lakh maturing in 2026 ensure mid-term stability.

Investments
Mutual fund portfolio of Rs 36 lakh is well-diversified across large, mid, and small caps.

Gold bonds with a current value of Rs 6.85 lakh add stability and hedge against inflation.

Equity shares valued at Rs 47 lakh showcase significant growth.

National Pension System (NPS) holding of Rs 6 lakh offers retirement-oriented savings.

Retirement Savings
EPFO corpus of Rs 12.25 lakh and PPF balance of Rs 7.67 lakh ensure steady long-term growth.

Term plan coverage of Rs 1 crore secures your family's future.

Family Support
Your wife’s monthly income of Rs 70,000 provides stability.

Your father’s solid financial base and Rs 45,000 pension ensure reduced dependency.

Estimating Retirement Corpus
Retirement planning requires addressing future expenses, inflation, and longevity.

Monthly Expense Analysis
Your current expenses of Rs 1.25 lakh per month are significant.

Adjust for post-retirement expenses like reduced work-related costs but increased healthcare spending.

Corpus Needed
For a peaceful retirement, aim for a corpus that generates Rs 1.25 lakh monthly for at least 30 years.

Factor in inflation at 6-7% annually to maintain purchasing power.

A corpus of Rs 12-15 crore is recommended for financial independence.

Strategic Recommendations
Step 1: Optimising Current Assets
Avoid excessive reliance on savings accounts and fixed deposits due to lower returns.

Reinvest FD maturity proceeds into higher-yielding instruments like mutual funds.

Step 2: Enhancing Mutual Fund Investments
Increase mutual fund allocation to Rs 50 lakh in a staggered manner.

Focus on actively managed funds for better performance over passive options like index funds.

Diversify further across asset classes and maintain a balance between equity and debt.

Step 3: Consolidating Gold and Equity
Gold bonds and equity shares have grown well.

Retain gold bonds for stability but monitor equity shares for market risks.

Systematically transfer gains from volatile equity to stable debt funds or hybrid funds.

Step 4: Strengthening Retirement-Specific Savings
Increase contributions to NPS for additional tax benefits and retirement growth.

Continue regular contributions to PPF, which is risk-free and tax-efficient.

Maintain EPFO balance, and avoid withdrawing unless necessary.

Step 5: Creating a Balanced Corpus for Child’s Education
Your daughter is 8 years old, and higher education expenses will occur in 10-12 years.

Allocate Rs 25 lakh into child education-focused mutual funds or debt-oriented funds.

Start an SIP to build this fund systematically.

Step 6: Managing Health and Insurance
Your health insurance coverage of Rs 13 lakh is good. Ensure it includes critical illness coverage.

Consider top-up plans to cover any significant medical expenses in the future.

Review your term plan periodically to ensure adequate coverage.

Optimising Your Father’s Financial Portfolio
Active and Passive Income
Your father’s Rs 45,000 monthly pension is stable.

Rental income of Rs 18,000 adds a small but regular inflow.

Investment Portfolio Management
Consolidate his Rs 1 crore equity/mutual fund portfolio to reduce risks post-retirement.

Diversify between equity, debt, and fixed-income instruments for balance.

Monitor FD renewals to ensure competitive interest rates.

Property Considerations
His property portfolio offers a mix of rental and non-income-generating assets.

Avoid liquidating assets unless it becomes necessary to meet financial needs.

Tax-Efficient Strategies
Use ELSS mutual funds to save taxes under Section 80C while building wealth.

NPS contributions provide tax benefits under Section 80CCD(1B).

Plan mutual fund redemptions carefully to minimise long-term and short-term capital gains taxes.

Finally
A peaceful retirement requires balancing current and future needs.

Build a robust corpus through diversified investments.

Review your portfolio annually and make adjustments with the guidance of a certified financial planner.

Stay disciplined and prioritise long-term financial security over short-term gains.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Ramalingam

Ramalingam Kalirajan  |8600 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 23, 2024

Asked by Anonymous - Dec 17, 2024Hindi
Money
I & my wife is 32. What would our ideally retirement corps. I assume 20Cr. Correct me if I'm wrong. My current saving & income are below - 1) Rs 2,40,000 take home per month combined. 2) We both have PPF for the last 7 years contributing 1.5L each year from starting and plans to continue till 60. 3) LIC will give us 2Cr when we hit 60. 4) NPS we contribute 1L per each year form 2022 combined plans continue till 60. 5) Mutual Fund of SIP Rs 10,000 each month for last 1 year combined plans continue till 60. 6) APY we will get 5000 per month at 60. 7) FDs of Rs 36Lakh 8) Gold of Rs 15Lakh bonds 9) Got Inherited Rs 1.6Cr in form of FDs 10) Have Medeclaim of 40Lakhs and have own house. 11) Monthly expenses is around 40,000. 12) Have 1 year old Kid. 13) Have PF of 8 lakhs and will grow till 60. Also taking Gratuity in account
Ans: Planning for Rs 20 crore retirement corpus is ambitious yet realistic for your profile.

It’s essential to evaluate your goals, current assets, and future savings growth.

Below is a detailed breakdown to assess your situation and strategy:

Estimating Future Requirements
At 32, you have 28 years to retire.

Current expenses are Rs 40,000 monthly, translating to Rs 4.8 lakh annually.

Considering inflation at 6%, annual expenses will multiply significantly by 60 years.

By retirement, your monthly expense may be Rs 3 lakh (adjusted for inflation).

To sustain expenses for 30 years post-retirement, Rs 20 crore is a reasonable goal.

Existing Investments and Their Growth Potential
1. PPF Contributions
Current contribution: Rs 1.5 lakh each per year.

With consistent contributions till 60, expect substantial compounded growth.

PPF is secure but offers moderate returns, around 7%-8%.

2. LIC Plan
LIC will provide Rs 2 crore at age 60.

Consider this a fixed component of your retirement corpus.

3. NPS Contributions
Current combined contribution: Rs 1 lakh annually.

NPS can generate higher returns (8%-10%) with exposure to equity and debt.

This will supplement your retirement corpus significantly.

4. Mutual Fund SIPs
SIPs of Rs 10,000 per month for 28 years can grow substantially.

Equity mutual funds are ideal for long-term growth.

Ensure the funds are actively managed for higher returns.

5. Fixed Deposits
Rs 36 lakh and Rs 1.6 crore in inherited FDs offer stability.

FD returns are lower and taxable.

Consider allocating some FD amounts into equity funds for better growth.

6. Gold Bonds
Rs 15 lakh in gold is a valuable inflation hedge.

Hold it as part of your diversified portfolio.

7. APY Pension
APY will provide Rs 5,000 monthly from age 60.

This is supplementary income for basic needs.

8. Provident Fund (PF) and Gratuity
Current PF corpus is Rs 8 lakh.

PF and gratuity will grow significantly by 60.

Consider this part of your core retirement corpus.

Investment Adjustments for Better Growth
1. Increase SIP Contributions
Increase your mutual fund SIPs from Rs 10,000 to Rs 50,000 gradually.

Equity funds provide better inflation-beating returns than other options.

2. Diversify Across Mutual Fund Categories
Invest in large-cap, mid-cap, and flexi-cap funds for a balanced portfolio.

Avoid relying heavily on debt-oriented funds due to inflation risks.

3. Review FD Allocation
Reallocate a portion of inherited and personal FDs to higher-growth assets.

Keep only the amount needed for short-term emergencies in FDs.

4. Monitor NPS Allocation
Choose a higher equity exposure (up to 75%) within NPS for growth.

Shift to safer funds five years before retirement.

5. Set Up Emergency Fund
Retain at least 6-12 months of expenses in liquid assets.

This protects against unforeseen expenses without disrupting long-term investments.

Strategies for Your Child’s Future
Start a separate SIP for your 1-year-old child’s education and future needs.

A Rs 10,000 monthly SIP in equity funds can build a strong education corpus.

Consider child-specific plans for goal-oriented investments.

Tax Efficiency in Investments
1. Tax on FDs
FD interest is taxable as per your income tax slab.

This reduces net returns.

2. NPS Tax Benefits
NPS contributions provide tax deductions under Section 80CCD.

Withdrawals have partial tax-free benefits.

3. Mutual Funds Taxation
Equity mutual funds attract LTCG above Rs 1.25 lakh at 12.5%.

Short-term gains are taxed at 20%.

Maintain a balance to minimise tax liabilities.

Health and Life Insurance
Rs 40 lakh mediclaim is good coverage for now.

Consider increasing it to Rs 1 crore for rising medical costs.

Review your LIC coverage to ensure it complements your investments.

Final Insights
Your current plan is on track for a Rs 20 crore retirement corpus.

Optimise by increasing SIPs, reducing FDs, and reviewing asset allocation.

Focus on equity-driven investments for long-term growth.

Regularly monitor and adjust your portfolio to stay aligned with your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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Ans: Gagan, Taking a partial drop (preparing for JEE while attending college) is possible but challenging. Students often join engineering colleges via state quotas or management seats (e.g., AP/TS EAPCET Category-B) to secure admission with lower board scores (64% is sufficient for many private colleges). However, balancing college academics (attendance, assignments) with JEE prep requires strict time management and discipline. For instance, students in integrated programs (e.g., Resonance, Sri Chaitanya) combine 12th boards with JEE coaching, but this model is harder to replicate in college. Alternatives include lateral entry after a diploma or targeting colleges with flexible attendance policies. While partial drops are mentally taxing, they allow backup options if JEE isn’t cleared. Prioritize colleges with lighter academic loads or online/distance programs to focus on JEE. Note that NITs/IIITs require 75% boards (65% for reserved categories), so improving board scores via compartment exams may help future attempts. Recommendation: If confident in multitasking, opt for a partial drop; otherwise, focus on college and switch branches later via GATE or state exams. All the best for your admission and a bright future!

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