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Ramalingam Kalirajan |4329 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 06, 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 DEBABRATA on May 31, 2024Hindi

Hello sir, Debabrata here , i am a psu banker current salary in 85k/- month gross , my NPS balance is 10.80 lakh , i invest my savings in my father’s account in SCSS 15 lakhs , no loan till now , want to retire at 50 with 3 lakh pension , so how i will manage my financial goal ? Guide me

Ans: Understanding Your Financial Goals

Debabrata, thank you for sharing your financial details and goals. Your ambition to retire at 50 with a Rs 3 lakh pension is commendable. Let's delve into how you can achieve this, considering your current situation and future aspirations.

Current Financial Position

Your current monthly gross salary is Rs 85,000, and your NPS balance stands at Rs 10.80 lakh. You have invested Rs 15 lakh in SCSS through your father’s account. You have no existing loans, which is a solid foundation.

Future Financial Needs

To retire at 50 with a Rs 3 lakh monthly pension, we need to assess several factors:

Life Expectancy: Assuming you live till 80, you will need a pension for 30 years post-retirement.

Inflation: Considering an average inflation rate of 6%, your pension needs will increase over time.

Pension Corpus: To generate a Rs 3 lakh monthly pension, you need a substantial corpus. We’ll calculate this in detail.

Calculating the Required Retirement Corpus

To calculate your retirement corpus, we need to consider:

Monthly pension requirement: Rs 3 lakh
Annual pension requirement: Rs 3 lakh x 12 = Rs 36 lakh
Adjusting for inflation: Assuming a 6% inflation rate over 30 years, we need to calculate the future value of your pension needs.

So, you will need approximately Rs 28.95 crore at retirement to sustain a Rs 3 lakh monthly pension.

Current Investments and Savings

NPS (National Pension System): Your NPS balance is Rs 10.80 lakh. This is a good start, but you need to continue contributing regularly.

SCSS (Senior Citizens Savings Scheme): You have invested Rs 15 lakh in SCSS. This is a safe investment but offers limited growth.

Monthly Savings and Investments: To achieve your goal, you need to aggressively save and invest a significant portion of your salary.

Creating a Financial Plan

Increase NPS Contributions: Maximize your NPS contributions to benefit from tax savings and compounding growth. Aim to contribute the maximum limit.

Diversify Investments: Diversify your investments across various asset classes to balance risk and returns. Consider mutual funds, PPF, and other safe investment options.

Mutual Funds: Actively managed mutual funds can offer higher returns compared to index funds. Invest in mutual funds through a Certified Financial Planner for expert guidance.

PPF (Public Provident Fund): PPF offers tax-free returns and should be a part of your investment portfolio for its safety and steady growth.

Equity Investments: Allocate a portion of your investments to equities for long-term growth. Equities can provide higher returns but come with higher risk.

Regular Reviews and Adjustments

Annual Reviews: Review your financial plan annually to ensure you are on track. Adjust your investments based on market conditions and life changes.

Risk Management: Ensure you have adequate insurance coverage for life, health, and critical illness to protect your family and assets.

Emergency Fund: Maintain an emergency fund to cover at least 6-12 months of living expenses. This will provide financial security during unforeseen circumstances.

Retirement Planning

Systematic Withdrawal Plans (SWP): Use SWPs in mutual funds to generate regular income post-retirement. This will provide a steady cash flow while keeping your corpus invested.

Tax Planning: Efficient tax planning can help you save more and invest wisely. Utilize all available tax-saving instruments.

Debt Management: Avoid taking on new loans close to retirement. Focus on becoming debt-free to reduce financial burdens.

Achieving Financial Independence

Disciplined Savings: Maintain a disciplined approach to saving and investing. Automate your investments to ensure consistency.

Increase Savings Rate: Gradually increase your savings rate as your income grows. Aim to save at least 30-40% of your income.

Professional Guidance: Seek advice from a Certified Financial Planner to tailor your financial plan to your specific needs and goals.

Additional Considerations

Lifestyle Adjustments: Consider potential lifestyle changes post-retirement. Adjust your financial plan to accommodate these changes.

Health Care Costs: Factor in rising health care costs in your retirement planning. Ensure you have adequate health insurance.

Legacy Planning: Plan for the distribution of your wealth. Create a will and consider setting up trusts for efficient estate planning.

Conclusion

Debabrata, your goal of retiring at 50 with a Rs 3 lakh pension is achievable with disciplined planning and strategic investments. By following the outlined steps and regularly reviewing your plan, you can ensure a comfortable and financially secure retirement.

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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