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42-Year-Old IT Professional With Land and Investments: Ready to Retire?

Ramalingam Kalirajan |8365 Answers |Ask -Follow

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 - Jun 09, 2024Hindi

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Hello, I am 42 yrs old IT professional. Presently I am bored with my job and wish to take retirement. My expenses are 70k per month. I have two daughters studying in class 9 and class 2, for their education and marriage, I have land worth 2 crores. I have MF corpus of 1.2 crore for which SWP can give me a monthly income of 1 lakh per month (Assuming rate of 12% for 30 years). Can I go ahead and take retirement or should I wait till I reach age of 45 ? My salary is 40 lakhs per year (before tax)

Ans: Evaluating Your Current Situation

You are 42 years old and considering early retirement. Your monthly expenses are Rs. 70,000. You have two daughters in class 9 and class 2. For their education and marriage, you have land worth Rs. 2 crores. You have a mutual fund corpus of Rs. 1.2 crores, which can provide a monthly income of Rs. 1 lakh through SWP, assuming a 12% return over 30 years. Your annual salary is Rs. 40 lakhs before tax.

Assessing Financial Readiness for Early Retirement

1. Monthly Expenses vs. Income:

Your monthly expenses are Rs. 70,000.
Your SWP from mutual funds can provide Rs. 1 lakh per month.
This gives a surplus of Rs. 30,000 per month.

2. Future Expenses:

Consider future inflation and increased expenses.
Your children’s education and marriage costs will rise.

3. Asset Allocation:

You have land worth Rs. 2 crores for your daughters’ future needs.
Your current liquid investments are in mutual funds.

Advantages of Retiring Now
1. Financial Stability:

Your current investments provide more than your monthly needs.
Land assets can cover major future expenses.
2. Quality of Life:

You can start enjoying a stress-free life earlier.
Spend more time with family and pursue other interests.

3. Health and Well-being:

Early retirement can reduce stress and improve health.
More time for hobbies and personal development.

Considerations for Delaying Retirement
1. Building a Larger Corpus:

Working until 45 can increase your savings significantly.
Higher corpus means more financial security and flexibility.

2. Higher Future Expenses:

Future costs for education, healthcare, and lifestyle will rise.
A larger corpus can better handle unexpected expenses.

3. Better Investment Growth:

Additional three years of salary can boost your investment portfolio.
Can lead to higher compounding benefits and returns.

Recommended Approach

1. Continue Working Until 45:

Increases financial security.
Build a larger corpus for future needs.
2. Diversify Investments:

Allocate part of your surplus to equity and debt mutual funds.
Consider balanced funds for growth and stability.

3. Use Surplus Wisely:

Invest your Rs. 30,000 monthly surplus.
Focus on high-return investments with calculated risk.

4. Emergency Fund:

Maintain an emergency fund for unexpected expenses.
Ensure it covers at least 12 months of expenses.

5. Adequate Insurance:

Ensure sufficient health and life insurance.
Review policies to match your current and future needs.

6. Plan for Children's Education:

Start dedicated funds for their education.
Use a mix of equity and debt funds for this goal.

Final Insights
Considering early retirement at 42 can be appealing, but waiting until 45 can provide greater financial security. Your current investments are strong, but additional years of savings and investment can ensure a more comfortable and worry-free retirement. Focus on building a larger corpus, diversifying investments, and planning for future expenses to achieve your retirement goals effectively.

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.