Hello Kalirajan Sir. I am a 44 year old NRI and have current salary of over 2cr per annum. I have a very decent lifestyle but also save a good amount of money each year. My current savings are as follows 1.) FDs 8.8cr 2.) Indian stock market - 6 cr 3.) MFs - 70 lakh 4.) Gold bars - 50 L 5.) US$ investments - 1 cr. 6.) 2 pension plans of 10L each - Total contribution to date 60L. I don't have any liabilities for the time being. No properties in India or abroad but expect to inherit valuable property of approximately 10cr in India. I have 2 children aged 12 and 7. I saved approximately 1.3cr last year from my salary and generated approximately 1.2 cr income from my Indian investments. Needless to say, the numbers look healthy, but are they? I expect that the children will be studying abroad for their graduation, and I have 16 years of work life to work towards my savings. But I don't want to work for another 16 years. What should I do to be able to retire in my early 50s with a 50cr net worth? I am currently in a position to invest 6L per month quite easily but don't want to deploy money in FDs.

Ans: Your financial planning is quite impressive, especially given your responsibilities and future goals. Let's break down your situation and create a solid strategy to achieve your retirement goal by age 50.

Understanding Your Current Financial Situation
You are 43 years old and aim to retire by 50. Here's a snapshot of your current finances:

Fixed Deposits (FDs): Rs 1.5 crore
Home Loan: Rs 1.8 crore
Loan-Free Property: One
Loan-Pending Properties: Two, with Rs 1.8 crore pending
Property Value: Rs 7 crore (current market rate)
Life Insurance: Rs 1 crore
Family Health Insurance: Rs 1 crore
Mutual Funds: Rs 22 lakh
Public Provident Fund (PPF): Rs 30 lakh
Monthly Expenditure: Rs 1.5 lakh
Home Loan EMI: Rs 1.5 lakh
Monthly Salary: Rs 3.5 lakh
Two Kids (9 years old)
Prioritizing Financial Goals
Retirement Planning
Early Loan Repayment
Children's Education and Future
Let's dive deeper into each goal.

Retirement Planning
Retiring by age 50 means you have only seven years to build a substantial corpus. Here's how you can achieve this:

Evaluate Your Investments
You have significant savings in FDs, mutual funds, and PPF. These are good, but diversifying further can enhance returns. Mutual funds can provide higher returns compared to FDs and PPF, especially over the long term.

Power of Compounding
The power of compounding can significantly grow your investments. By investing regularly in mutual funds, you can benefit from rupee cost averaging and mitigate market volatility.

Diversify Your Mutual Funds
Consider allocating your investments across different categories of mutual funds for better returns:

Large-Cap Funds: Invest in well-established companies for stability.
Mid-Cap Funds: Invest in medium-sized companies with higher growth potential.
Small-Cap Funds: Invest in smaller companies for high returns, though with higher risk.
Balanced or Hybrid Funds: These provide a mix of equity and debt, balancing risk and return.
Increase Your SIP Contributions
Given your current salary, you can allocate more towards SIPs. Increasing your monthly SIPs in mutual funds will help you build a substantial retirement corpus.

Early Loan Repayment
Reducing your debt burden before retirement is crucial. Here's how you can tackle your home loan effectively:

Lump-Sum Payments
Whenever you have surplus funds, consider making lump-sum payments towards your home loan. This will reduce your principal amount and overall interest burden.

Prepaying with FD Maturities
As your FDs mature, use a portion to prepay your home loan. This strategy can significantly reduce your EMI burden and loan tenure.

Children's Education and Future
Planning for your children's education and future expenses is equally important. Here’s a strategy:

Separate Education Fund
Create a dedicated education fund for your kids. Investing in equity mutual funds can be beneficial due to their long-term growth potential.

Systematic Investment Plan (SIP)
Set up SIPs in mutual funds specifically for your children's education. This will ensure you have a substantial corpus when needed.

Evaluating Current Investments
Fixed Deposits (FDs)
FDs provide safety but relatively lower returns. Consider gradually shifting some funds from FDs to higher-yielding investments like mutual funds.

Mutual Funds
Your current mutual fund investment of Rs 22 lakh is a good start. Increase your SIPs to enhance this corpus. Diversify across different categories for balanced growth.

Public Provident Fund (PPF)
PPF is a safe investment with tax benefits. Continue investing in PPF for assured returns and stability in your portfolio.

Insurance Coverage
Life Insurance
Your current life insurance cover of Rs 1 crore is good. Ensure it is sufficient to cover any outstanding liabilities and your family's needs in case of any eventuality.

Health Insurance
Your family health insurance cover of Rs 1 crore is adequate. Review it annually to ensure it meets rising healthcare costs.

Strategic Investment Allocation
Here’s a suggested allocation for your additional investments:

Increase SIPs in Mutual Funds: Allocate a significant portion of your savings towards diversified equity mutual funds.
Prepay Home Loan: Use FD maturities and any surplus funds for lump-sum payments towards your home loan.
Dedicated Education Fund: Set up separate SIPs for your children's education.
Final Insights
Balancing long-term goals like retirement, medium-term goals like loan repayment, and short-term goals like children's education is key. By diversifying your investments, making strategic loan prepayments, and saving diligently, you can achieve financial stability and enjoy a comfortable retirement by age 50.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

Ans: Current Financial Situation
You have a monthly fixed income of Rs 2.5 lakh.

You have started a Rs 15,000 monthly SIP for five years.

You plan to reinvest the returns for another five years.

You have two ancestral properties worth Rs 50 lakh and Rs 80 lakh.

You have an ICICI Gift Plan with a yearly premium of Rs 2.4 lakh for seven years.

You have a guaranteed income of Rs 1.4 lakh after the tenth year for fifteen years.

You will receive a lump sum payout of Rs 16.8 lakh after fifteen years.

You have a term life insurance of Rs 1.5 crore.

You have two daughters below six years old.

You have a Rs 5 lakh FD for ten years for their education.

Investment Strategy
SIP Investments

Continue the Rs 15,000 monthly SIP.
Reinvest the returns for another five years.
Consider diversifying into equity and hybrid funds for better returns.
ICICI Gift Plan

Evaluate the benefits and returns.
Consider the plan’s impact on overall financial goals.
If returns are lower than expected, consider other investment options.
FD for Children's Education

FDs provide safety but lower returns.
Consider shifting part of it to debt or hybrid funds.
This can offer better returns with moderate risk.
Additional Investments
Mutual Funds

Increase SIP amount if possible.
Diversify across large, mid, and small-cap funds.
Add some debt funds for stability.
Children's Education

Consider investing in child-specific mutual funds.
Use SIPs for systematic investments.
Retirement Corpus

Aim to build a retirement corpus by age 55.
Invest in a mix of equity, debt, and hybrid funds.
Regularly review and adjust your portfolio.
Insurance and Safety Nets
Term Life Insurance

Your Rs 1.5 crore term insurance is good.
Ensure it covers your family’s financial needs.
Health Insurance

Get comprehensive health insurance.
Cover your family adequately.
Estate Planning
Ancestral Properties

Evaluate the potential rental income.
Consider the long-term value of these properties.
Actively Managed Funds vs Index Funds
Disadvantages of Index Funds

Passive management limits growth potential.
They may underperform in volatile markets.
Benefits of Actively Managed Funds

Potential for higher returns.
Experienced fund managers adapt to market changes.
Regular Funds vs Direct Funds
Disadvantages of Direct Funds

Lack of professional guidance.
Time-consuming to manage independently.
Benefits of Regular Funds

Professional management by a Certified Financial Planner.
Easier to track and manage investments.
Final Insights
Focus on building a diversified portfolio.
Regularly review and adjust your investments.
Ensure adequate insurance coverage.
Plan for your children’s education systematically.
Stay disciplined and invest with a long-term perspective.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in