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Ramalingam

Ramalingam Kalirajan  |7014 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 07, 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 - Oct 07, 2024Hindi
Money

Hello, I am 49 yrs old having wife (homemaker) and one son 13 yrs. I want to retire by age of 55 yrs. I have adequate health Insurance for family also have company health insurance. I have PPF 20 lacs approx., MF 30 lacs, Rental income 25K monthly, Direct Equity 50K, Emergency FD 2 lacs. Have 11 yrs remaining on housing loan EMI 25K. My in hand salary is 1.10K monthly. I want to get 1 lac per month after retirement. Please advice.

Ans: You have done well to build a strong financial base. Your savings and investments are diverse, and you also have rental income to support your retirement. Let's break down your current assets and liabilities:

Public Provident Fund (PPF): Rs 20 lakhs
Mutual Funds: Rs 30 lakhs
Rental Income: Rs 25,000 monthly
Direct Equity: Rs 50,000
Emergency Fixed Deposit: Rs 2 lakhs
Home Loan: 11 years remaining with an EMI of Rs 25,000
Monthly Salary: Rs 1.10 lakhs in hand
You also mentioned having adequate health insurance for your family, which is essential for financial security.

Retirement Goal: Rs 1 Lakh Per Month
You plan to retire at the age of 55, and your goal is to generate Rs 1 lakh per month after retirement. Let's now assess how to achieve that.

Assessment of Income and Expenses Post-Retirement
You will continue to receive Rs 25,000 per month from rental income. Therefore, the remaining Rs 75,000 per month will need to come from your investments.

Your current home loan is an ongoing liability, with an EMI of Rs 25,000. It would be ideal to explore prepayment options or at least ensure that this EMI doesn’t stretch too far into your retirement.

Now let’s focus on optimizing your investments and income sources.

Evaluate Your Investments
Your portfolio is quite diversified, with investments in PPF, mutual funds, direct equity, and a fixed deposit for emergencies. However, some adjustments may be needed to generate a regular income of Rs 75,000 per month after retirement.

Public Provident Fund (PPF)
The current PPF balance of Rs 20 lakhs is a safe and tax-efficient investment.
Continue contributing to PPF, but remember that its lock-in period and lower liquidity make it less ideal for regular income.
Mutual Funds
Your Rs 30 lakhs in mutual funds will play a crucial role in achieving your retirement income goals.
Since mutual funds have the potential for higher returns, maintaining and growing this corpus is important.
You can opt for a Systematic Withdrawal Plan (SWP) post-retirement. This will allow you to withdraw a fixed amount regularly without depleting the principal too fast.
Regularly review the performance of your mutual funds. Focus on actively managed funds rather than index funds, as actively managed funds can potentially outperform in the long term.
Direct Equity
Your Rs 50,000 in direct equity is a small portion of your portfolio.
Direct equity investments can be volatile, and since the amount is relatively small, you might not want to rely on it for regular income.
Consider shifting a portion of this to mutual funds for better risk management through professional fund managers. Regular funds managed by mutual fund distributors (MFDs) who are certified financial planners (CFPs) are often better for long-term growth.
Fixed Deposit for Emergencies
Your Rs 2 lakh fixed deposit is useful as an emergency buffer.
Keep this fund intact and do not use it for income generation. It's always wise to have 6-12 months’ worth of expenses in liquid, easily accessible funds.
Home Loan Strategy
The EMI of Rs 25,000 per month is a significant expense. With 11 years left on the loan, this will continue well into your retirement unless paid off earlier. Here's what you can consider:

Prepaying the loan: If feasible, use some of your current salary or rental income to prepay a portion of the home loan. Reducing this liability before retirement will ease the financial burden later.
If prepaying is not possible, ensure that your post-retirement income can comfortably cover the EMI.
Retirement Corpus Requirement
Assuming you need Rs 75,000 per month from your investments (since Rs 25,000 will come from rent), you will need to build a sufficient corpus by the time you retire. The corpus should be able to generate this amount through systematic withdrawals and interest income.

With inflation and other factors in mind, a rough estimate suggests that you will need a retirement corpus of around Rs 1.5 crore to Rs 2 crore to safely generate Rs 75,000 per month. Let's now explore how to build this corpus over the next six years.

Investment Strategies to Build Your Retirement Corpus
Increase Contributions to Mutual Funds
Currently, you have Rs 30 lakhs in mutual funds. Over the next six years, this can grow significantly, depending on market conditions.
Consider increasing your monthly contributions to mutual funds. This will help you build a larger corpus by the time you retire.
Opt for equity-focused mutual funds for long-term growth. Equities tend to outperform other asset classes over longer periods.
Keep a balance between mid-cap, small-cap, and large-cap funds to optimize your returns. Avoid index funds as they may provide lower returns compared to actively managed funds.
Use Systematic Investment Plans (SIPs)
Systematic Investment Plans (SIPs) will help you build your corpus in a disciplined manner.
By investing regularly, you will also benefit from rupee cost averaging, which helps mitigate the impact of market volatility.
Avoid Direct Equity for Regular Income
Direct equity investments can be unpredictable and volatile. Since your goal is to generate regular income, avoid relying on direct equity.
Shift a portion of your direct equity investments into safer options like mutual funds managed by professionals. Regular mutual funds, managed by MFDs who are certified financial planners (CFPs), provide more stability and better risk management compared to direct equity or index funds.
Rental Income and Real Estate
Your Rs 25,000 rental income will be a steady source of income post-retirement.
Consider increasing the rent periodically to keep up with inflation.
Inflation and Rising Costs
It’s crucial to factor in inflation when planning for retirement. While you might need Rs 1 lakh per month today, the cost of living will rise in the future. Therefore, building a larger corpus than initially expected is always a good strategy.

Your rental income and systematic withdrawals from your mutual funds should help mitigate the impact of inflation, but do review your plan every few years to ensure you're on track.

Additional Considerations for Retirement Planning
Emergency Fund
You have an emergency FD of Rs 2 lakhs, which is a good start. However, as you get closer to retirement, it may be worth increasing this to cover at least 6-12 months of living expenses. This way, you won’t need to dip into your retirement savings for any urgent needs.

Health Insurance
You mentioned having adequate health insurance, including company-provided coverage. After retirement, you won’t have employer-provided coverage. Therefore, consider enhancing your health insurance coverage before you retire. This will protect you and your family from any unexpected medical expenses post-retirement.

Taxation of Investments
Your post-retirement income will be subject to taxation. Here’s a quick overview of how your investments will be taxed:

Rental Income: Taxed as per your income tax slab.
Mutual Funds (Equity): Long-term capital gains (LTCG) above Rs 1.25 lakh will be taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%.
PPF: Interest earned is tax-free.
Fixed Deposit Interest: Taxed as per your income tax slab.
Ensure that your withdrawals and income sources are tax-efficient. A certified financial planner can help you optimize your tax liability in retirement.

Finally
You are on the right path toward a comfortable retirement. With a few strategic adjustments, you can achieve your goal of Rs 1 lakh per month after retirement. Focus on growing your mutual fund investments and paying down your home loan, while also keeping a strong emergency fund in place.

By maintaining a well-diversified portfolio and periodically reviewing your plan, you will be well-prepared for your retirement at 55.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment
Asked on - Oct 08, 2024 | Answered on Oct 08, 2024
Listen
Thank you Ramalingam Sir for your advice to achieve my income of 1 lac after retirement. However, please could you guide me on what Mutual funds to invest in these remaining 6 yrs so I can get good returns before my retirement. Also, I have heard about SWP is not good instrument a it will start depleting my investments quickly. Do you suggest to purchase an asset which will provide my regular rental income instead? Also, you have not considered about my sons educations expenses in future. Please through some light on it for better planning?
Ans: You're welcome! I'm glad to assist further.

To achieve your retirement goals in the remaining six years, I would recommend focusing on balanced mutual fund investments. Diversify across large-cap, mid-cap, and multi-cap funds to balance risk and returns. This strategy can help you accumulate a solid corpus by retirement.

Regarding SWP (Systematic Withdrawal Plan), it's actually a good tool for retirement income. It allows you to withdraw a fixed amount monthly, and your investments continue to grow. While it does deplete the investment, if managed well, it can provide a sustainable income.

As for purchasing an asset for rental income, I would advise against it. Real estate requires higher maintenance, and the returns are uncertain. Mutual funds, especially equity, offer better long-term returns and liquidity, which you will need in retirement.

For your son’s education, factor it into your financial plan now. Continue building your mutual fund portfolio and allocate a portion specifically for his education. Consider an education loan to partially fund it and reduce the financial strain on your corpus.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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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Sir My monthly income 82k after all tax deduction.Now I have one sip value 1lakh 30k where I invest 13k/month, 3lic insurance where I invest 60k annual,one term insurance 50lakhs till the age of 65,one home loan I have which emi 25k and over 2039. I want to take retire age of 50 and how would I get 2lakhs per month after retirement
Ans: Retirement Planning and Investment Strategy
Planning for retirement at the age of 50 requires careful financial management and strategic investment planning to achieve your goal of generating ?2 lakhs per month post-retirement. Let's analyze your current financial situation and outline an investment strategy to meet your retirement income needs.

Current Financial Situation
Monthly Income: ?82,000
SIP: ?1,30,000 (?13,000 per month)
Life Insurance: ?3 lakh annual premium
Term Insurance: ?50 lakhs coverage till age 65
Home Loan EMI: ?25,000 per month (until 2039)
Retirement Goal
You aim to retire at the age of 50 and generate ?2 lakhs per month post-retirement. To achieve this, we need to assess your retirement corpus requirement and devise an investment strategy accordingly.

Retirement Corpus Calculation
Assuming you live until the age of 85 and accounting for inflation, you would need a substantial retirement corpus to sustain ?2 lakhs per month for 35 years post-retirement.

Investment Strategy
Increase Savings: Maximize your savings by reducing unnecessary expenses and allocating additional funds towards retirement planning.

Optimize Investments:

SIPs: Continue investing in SIPs, but consider diversifying across equity and debt funds to balance risk and returns.
Life Insurance: Evaluate the coverage and cost-effectiveness of your life insurance policies. Consider term insurance for pure protection and invest the remaining premium amount in instruments that offer better returns.
Term Insurance: Ensure your term insurance coverage adequately protects your family's financial needs in case of unforeseen circumstances.
Home Loan: While the home loan reduces your disposable income, it also helps build asset value over time. Continue timely payments to clear the debt by 2039.
Retirement Corpus Accumulation:

Estimate your retirement corpus requirement based on your desired post-retirement income and expenses.
Utilize online retirement calculators or consult with a financial planner to determine the required corpus.
Investment Allocation:

Allocate your investments across a mix of equity, debt, and real estate to achieve long-term growth and stability.
Consider tax-efficient investment options such as PPF, NPS, and tax-saving mutual funds to optimize returns and minimize tax liability.
Regular Review:

Periodically review your investment portfolio and make necessary adjustments based on changing financial goals, market conditions, and life circumstances.
Seek professional guidance from a Certified Financial Planner to ensure your retirement plan remains on track and aligned with your objectives.
Conclusion
With a disciplined savings approach and strategic investment planning, you can work towards achieving your retirement goal of generating ?2 lakhs per month post-retirement. Start early, stay focused on your financial objectives, and seek expert advice to navigate your retirement journey successfully.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |7014 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2024

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I am 49+ I have 13 lacs MF, 65 lacs FD, MIS 9 LACS , FLAT Worth 80 Lacs, Gold worth 60 lacs, ppf worth 7 lacs , pf worth 28 Lacs , shares worth 7.5 lacs, insurance worth 30 lacs. , nps worth 3 lacs. Need monthly income of 50000 pm by 60. Pls advise way forward after retirement of 60.
Ans: You have a diversified range of investments, which is commendable. Let's break down your current holdings to get a clearer picture:

Mutual Funds: Rs 13 lakhs

Fixed Deposits: Rs 65 lakhs

Monthly Income Scheme: Rs 9 lakhs

Flat Worth: Rs 80 lakhs

Gold: Rs 60 lakhs

Public Provident Fund: Rs 7 lakhs

Provident Fund: Rs 28 lakhs

Shares: Rs 7.5 lakhs

Insurance: Rs 30 lakhs

National Pension System: Rs 3 lakhs

You need a monthly income of Rs 50,000 after you retire at 60. Let's explore how to achieve this goal.

Evaluating Your Current Investments
Mutual Funds:

Mutual funds are a great way to grow wealth over time. They provide diversification and professional management. However, consider switching from direct funds to regular funds. Regular funds offer better service and guidance through a Certified Financial Planner (CFP).

Fixed Deposits:

Fixed deposits are safe but offer lower returns. As you near retirement, safety becomes important. However, you need to balance safety with growth. Too much in fixed deposits can erode your purchasing power due to inflation.

Monthly Income Scheme (MIS):

The Monthly Income Scheme offers regular income but limited growth. It’s a safe option but does not keep pace with inflation.

Flat Worth:

Your flat is a significant asset. While it provides value, it's not a liquid asset. It can be considered for future use, like selling or renting, to generate income post-retirement.

Gold:

Gold is a good hedge against inflation. It's a safe investment, but it doesn't provide regular income. Consider holding gold as part of your diversified portfolio.

Public Provident Fund (PPF):

PPF is a safe, long-term investment. It provides tax benefits and steady returns. Continue contributing to it as it forms a stable part of your retirement corpus.

Provident Fund (PF):

Provident Fund is a reliable retirement savings tool. It provides steady growth and is a safe investment. Ensure you keep track of your contributions and interest earned.

Shares:

Shares offer growth potential but come with higher risk. Keep a portion of your portfolio in shares for growth. However, as you approach retirement, gradually reduce exposure to high-risk stocks.

Insurance:

You have insurance worth Rs 30 lakhs. Ensure you have adequate coverage for health and life insurance. Reassess your insurance needs periodically.

National Pension System (NPS):

NPS is a good retirement savings option. It offers tax benefits and steady returns. Continue contributing to NPS for long-term growth.

Building a Retirement Strategy
Estimate Your Retirement Corpus:

You need a clear estimate of your retirement corpus. Given your requirement of Rs 50,000 per month, calculate your annual need and factor in inflation. This will give you a target corpus to aim for.

Asset Allocation:

Diversify your investments across different asset classes. A balanced mix of equity, debt, and alternative investments can provide growth and stability.

Equity:

Allocate a portion to equity for growth. Consider actively managed mutual funds for better returns. Actively managed funds can outperform index funds due to professional management and market insights.

Debt:

Debt investments provide stability. Use fixed deposits, PPF, and debt mutual funds. They offer regular income and lower risk.

Gold:

Keep gold as a part of your portfolio. It’s a good hedge against inflation and economic uncertainty.

Income Generation:

Post-retirement, you need to generate a steady income. Here are some options:

Systematic Withdrawal Plan (SWP):

Use SWP from your mutual funds to get regular income. It allows you to withdraw a fixed amount periodically.

Senior Citizen Savings Scheme (SCSS):

SCSS is a government-backed scheme offering regular income. It’s a safe option for retirees.

Monthly Income Plans (MIPs):

MIPs offer regular income with moderate risk. They invest in a mix of equity and debt.

Health Insurance:

Ensure you have adequate health insurance. Medical expenses can drain your savings quickly. Opt for a comprehensive family floater plan.

Emergency Fund:

Maintain an emergency fund. It should cover at least 6-12 months of expenses. Keep it in liquid assets for easy access.

Implementing the Strategy
Regular Reviews:

Review your portfolio regularly. Assess the performance of your investments and make adjustments as needed. A Certified Financial Planner can help you with this.

Rebalance Your Portfolio:

Rebalance your portfolio periodically. Ensure it aligns with your risk tolerance and retirement goals.

Reduce Debt:

If you have any outstanding loans, aim to pay them off before retirement. Reducing debt lowers your financial burden.

Tax Planning:

Plan your taxes efficiently. Use tax-saving instruments like PPF, NPS, and tax-saving mutual funds. They provide tax benefits and help grow your corpus.

Exploring Alternatives to Direct Funds
Disadvantages of Direct Funds:

Direct funds might seem attractive due to lower expense ratios. However, they lack the guidance of a Certified Financial Planner. This can lead to uninformed decisions and potential losses.

Benefits of Regular Funds:

Regular funds offer professional advice and service. Certified Financial Planners provide tailored investment strategies. They help you navigate market complexities and make informed decisions.

Avoiding Index Funds
Disadvantages of Index Funds:

Index funds replicate the market index. They offer average returns and lack flexibility. In volatile markets, they may not perform well.

Benefits of Actively Managed Funds:

Actively managed funds aim to outperform the market. They offer higher returns through expert management. Fund managers can adjust portfolios based on market conditions, offering better performance.

Final Insights
Planning for retirement requires a balanced approach. You need to ensure growth, stability, and regular income. Your current portfolio is diverse and well-structured.

Here are some key steps to move forward:

Diversify Investments:

Maintain a balanced mix of equity, debt, and alternative investments.

Generate Regular Income:

Use SWP, SCSS, and MIPs for steady income post-retirement.

Ensure Health Coverage:

Have comprehensive health insurance for unexpected medical expenses.

Maintain an Emergency Fund:

Keep liquid assets to cover 6-12 months of expenses.

Plan for Taxes:

Use tax-saving instruments to grow your corpus and reduce tax liability.

Seek Professional Guidance:

Consult a Certified Financial Planner for personalized advice and regular portfolio reviews.

By following these steps, you can achieve your goal of a comfortable retirement with a monthly income of Rs 50,000.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Ramalingam Kalirajan  |7014 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2024

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I am 40 years old. I have 3 plots worth 40 lakhs, 10 lacs in MF, 8 lacs in PPF, 6 lacs in SSY. I have two daughters of 8 years and 3 years. My current salary is 1 lac per month.I want retirement at 50 with 1 lac per month regular income.
Ans: You have a solid foundation. Your assets include three plots worth Rs 40 lakhs, Rs 10 lakhs in mutual funds, Rs 8 lakhs in PPF, and Rs 6 lakhs in SSY. Your monthly salary is Rs 1 lakh. Your goal is to retire at 50 with a monthly income of Rs 1 lakh.

Assessing Existing Investments
Real Estate Holdings

You have three plots worth Rs 40 lakhs. Real estate can be a stable asset. However, it's less liquid. You may consider keeping these plots for long-term appreciation. Avoid additional real estate investments for diversification.

Mutual Funds

You have Rs 10 lakhs in mutual funds. Actively managed funds are beneficial. They offer better returns than index funds due to expert management. Direct funds lack personalized advice. Investing through a Certified Financial Planner (CFP) ensures guidance and higher returns.

Public Provident Fund (PPF)

You have Rs 8 lakhs in PPF. PPF is a secure, long-term investment. It offers tax benefits and decent returns. Continue investing in PPF for risk-free growth.

Sukanya Samriddhi Yojana (SSY)

You have Rs 6 lakhs in SSY for your daughters. This scheme offers high interest rates and tax benefits. Continue contributions for your daughters’ future needs.

Retirement Planning
To achieve your goal, you need a strategy. Here are the key steps:

Increase Mutual Fund Investments

Increase monthly SIPs in actively managed funds.
Aim for a diversified portfolio of equity, debt, and balanced funds.
Consult a CFP for personalized fund selection.
Maximize PPF Contributions

Max out your PPF contributions annually.
Benefit from the compound interest and tax savings.
Consider SSY for Daughters

Keep contributing to SSY for long-term benefits.
This will secure their education and marriage expenses.
Future Contributions and Savings
Monthly Savings Allocation

Increase your savings rate. Aim for 30-40% of your income.
Allocate funds to PPF, SSY, and mutual funds.
Emergency Fund

Maintain an emergency fund covering 6-12 months of expenses.
Keep this fund in a liquid asset like a savings account or liquid fund.
Insurance Needs
Life Insurance

Ensure adequate life insurance coverage.
Term insurance is a cost-effective option.
Coverage should be at least 10 times your annual income.
Health Insurance

Have a comprehensive health insurance plan for your family.
Ensure it covers all major illnesses and hospitalization expenses.
Tax Planning
Tax-Saving Investments

Utilize tax-saving options like ELSS, PPF, and SSY.
This will reduce your taxable income and enhance savings.
Final Insights
Your current financial position is strong. With focused planning, you can achieve your retirement goal. Prioritize diversified investments, tax planning, and insurance. Regularly review your portfolio with a Certified Financial Planner. This approach will ensure a secure and comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Milind

Milind Vadjikar  |616 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 20, 2024

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Hello, I am 48 yrs old having wife (homemaker) and one son 13 yrs. I want to retire by age of 58 yrs. I have adequate health Insurance for family also have company health insurance. I have PPF 20 lacs approx., MF 25 lacs, Rental income 25K monthly, Emergency FD 2 lacs. Have 11 yrs remaining on housing loan EMI 30K. My in hand salary is 1.10K monthly. I want to get a minimum1 lac per month after retirement income. Please advice how can I achieve my target considering sons higher education cost and my wife is housewife and she also requires minimum 20K expenses monthly for her personal use.
Ans: Hello;

The PPF and MF corpus may be utilised towards higher education requirement of your kid.

After 5 years the cumulative corpus of these investments will be 65 L+.

The monthly rental income may be used to pay for spouse requirement of 20 K per month.

You may initiate a monthly sip of 50 K in a combination of pure equity mutual funds and top-up the sip amount by minimum of 16% each year.

By the end of 12 years you may have a corpus of around 3.56 Cr.

If you utilise this amount to buy an immediate annuity from a life insurance company, you may expect to receive a monthly income of
1.24 L (post-tax) assuming 6% annuity rate.

Do continue the personal family healthcare cover (Min 50 L) which can be helpful with advancement in age.

Any EPF/NPS corpus will serve as your warchest to fight inflation in retirement.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

..Read more

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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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