Can I retire early at 44 with Rs 1.1 crore and monthly expenses of Rs 55,000?

Hello My age is 44, I have a savings of Rs 1.1 crores invested mostly in equity MF drawing a CAGR of around 10%. Investment details: 1) Rs 92 lakhs in MF 2) PF accumulated till date Rs 15 lakhs I want to retire early by 45-46. My monthly expenditure at present is Rs 55000. Shall I be able to sustain my balance life (considering life expectancy of 70). My wife is also working earning pretty well.

Ans: If you invest your corpus of 1.07 Cr(equity MF+PF) in conservative hybrid debt fund, then your corpus may grow to around~1.3 Cr in 2 years(by the time you are 46 and want to retire).

Then you can start an SWP @ say 5% per year which will translate into monthly payout of around 55K.

The aspect of inflation is not factored into this working since their is no scope with the current situation. Ofcourse you can increase the SWP rate but in case of adverse market situations you may eat into(deplete) your corpus.

However if you plan to work for 5-7 years more and build a corpus 2.6 Cr+ then the SWP payout at 5% will be able meet your inflation indexed expenses.

Also factor in need for adequate healthcare cover for you and your family as you grow older.

Inflation considered at 6%, return from conservative debt hybrid funds assumed at 10%.

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

You may follow us on X at @mars_invest for updates

Ans: Retirement Planning Assessment for a 53-Year-Old Single Woman

Understanding Your Current Financial Situation
Your financial situation appears well-structured. You have a mix of investments in mutual funds (MFs), public provident fund (PPF), provident fund (PF), fixed deposits (FDs), equity, and other investments. Additionally, you own two properties, with one generating a monthly rental income of Rs 10,000 and the other valued at Rs 1.5 crore, which you are considering selling.

Your Current Assets Breakdown
Mutual Funds (MFs): Rs 58 lakh
Public Provident Fund (PPF): Rs 22 lakh
Provident Fund (PF): Rs 13 lakh
Fixed Deposits (FDs): Rs 20 lakh
Equity Investments: Rs 48 lakh
Other Investments: Rs 20 lakh
Property 1 (generating rental income): Rs 10,000 per month
Property 2 (to be sold): Rs 1.5 crore
Assessing Your Retirement Readiness
At 53, with five years until your target retirement age of 58, it is crucial to evaluate if your current assets can sustain your lifestyle throughout retirement.

Income Generation Post-Retirement
Post-retirement, it is essential to ensure you have a steady stream of income. Your assets must generate enough returns to cover your living expenses. Given that you don't have dependents or any EMIs, your primary focus should be on maintaining a comfortable lifestyle and managing healthcare expenses.

Investment Analysis
Mutual Funds
Mutual funds are a significant part of your portfolio. They offer the potential for higher returns compared to traditional savings instruments. Actively managed funds can outperform the market if managed by skilled fund managers.

Public Provident Fund (PPF) and Provident Fund (PF)
Both PPF and PF are excellent for long-term savings due to their guaranteed returns and tax benefits. These instruments provide financial security and are low-risk investments.

Fixed Deposits (FDs)
FDs are safe but offer lower returns compared to equity and mutual funds. They are good for preserving capital but may not beat inflation in the long run.

Equity Investments
Equity investments have high growth potential. However, they come with higher risk. Diversifying within equity can help manage this risk and ensure growth.

Property Investments
Selling your second property, valued at Rs 1.5 crore, can significantly boost your retirement corpus. It is wise to reallocate this large sum into diversified investments to balance growth and safety.

Evaluating Your Monthly Expenses
Assuming your monthly expenses are Rs 50,000, your annual expenses amount to Rs 6 lakh. Post-retirement, you may need a larger corpus to account for inflation, unexpected expenses, and healthcare costs.

Projecting Your Retirement Corpus Needs
If we consider you need Rs 6 lakh annually and assuming a post-retirement life of 25 years, you would need at least Rs 1.5 crore, adjusting for inflation and ensuring a comfortable lifestyle.

Gap Analysis
Let's calculate if your current assets, plus potential returns and new investments, will meet your retirement goals.

Your Current Total Assets
Mutual Funds (MFs): Rs 58 lakh
Public Provident Fund (PPF): Rs 22 lakh
Provident Fund (PF): Rs 13 lakh
Fixed Deposits (FDs): Rs 20 lakh
Equity Investments: Rs 48 lakh
Other Investments: Rs 20 lakh
Sale of Property: Rs 1.5 crore
Total = Rs 3.31 crore

Projecting Returns and Expenses
Assuming a conservative average annual return of 8% across your portfolio, your corpus of Rs 3.31 crore could grow significantly over the next five years.

Adjusting for Inflation
Considering an inflation rate of 6%, your expenses may double in about 12 years. Thus, your retirement corpus should ideally grow faster than inflation.

Calculating Additional Monthly Investments
To achieve your retirement corpus goal comfortably, it is prudent to increase your investments. Assuming you need an additional Rs 50 lakh to feel financially secure, here's how you can achieve it in the next five years:

Monthly Investment:
To accumulate Rs 50 lakh in five years with an 8% annual return, you need to invest around Rs 65,000 per month.
Recommendations for Investment Strategy
Diversify and Rebalance
To ensure you meet your retirement goals, diversify your investments across various asset classes. Regularly rebalance your portfolio to align with your risk tolerance and market conditions.

Invest in Actively Managed Funds
Actively managed funds can offer higher returns compared to index funds, especially in a dynamic market. Skilled fund managers can adjust the portfolio based on market trends and opportunities.

Avoid Direct Funds
While direct funds have lower expense ratios, they require active management and market expertise. Investing through a Certified Financial Planner ensures professional management and guidance.

Selling the Second Property
Reinvest the proceeds from selling your second property. Diversify into a mix of mutual funds, debt instruments, and other suitable investment options to balance risk and returns.

Emergency Fund
Maintain an emergency fund to cover at least 6-12 months of expenses. This fund should be liquid and easily accessible, kept in savings accounts or short-term FDs.

Health Insurance
Ensure you have comprehensive health insurance to cover medical expenses. As you age, healthcare costs can increase significantly.

Final Insights
Your current financial position is strong, but to ensure a comfortable and worry-free retirement, consider increasing your monthly investments. Selling your second property and reinvesting the proceeds wisely will bolster your retirement corpus. Diversifying your investments and focusing on actively managed funds will help achieve better returns.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in