Retirement Planning: How Much Should I Invest at 38 with a 38 Lakh Home Loan?

Ans: Liver is the most Sacrificing organ meticulously meets all that which comes from outside as toxin and detoxifies it
Present day normal food itself has more adulteration which is dealt by liver. More substance abuse is an overload on liver.
So making lifestyle changes like eating early dinner by 6 pm and avoid deep fried food and animal protein at dinner meal. Exercise regularly.
It is good to nurture the liver

Ans: Understanding Section 80C
Section 80C of the Income Tax Act offers a deduction of up to ?1.5 lakh on your taxable income. This can be claimed by investing in various financial instruments. Here are some popular options that align with your goals:
1. Public Provident Fund (PPF):
• Pros: Safe, long-term investment with guaranteed returns.
• Cons: Lock-in period of 15 years.
2. Equity Linked Saving Scheme (ELSS):
• Pros: Potential for higher returns, shortest lock-in period (3 years).
• Cons: Market-linked risks.
3. National Pension Scheme (NPS):
• Pros: Tax benefits, pension income, additional deduction of ?50,000 under Section 80CCD(1B).
• Cons: Early withdrawal penalties.
4. Sukanya Samriddhi Yojana (SSY):
• Pros: Dedicated for a girl child, tax-free interest.
• Cons: Limited to two children, long-term investment.
5. Employee Provident Fund (EPF):
• Pros: Employer contribution, tax-free interest.
• Cons: Limited control over investment.
6. Tax-Saving Fixed Deposits:
• Pros: Relatively safe, fixed interest rate.
• Cons: Lower returns compared to other options.
Additional Tips:
• Diversify: Consider a mix of investments to manage risk and potentially maximize returns.
• Consult a financial advisor: Seek professional advice tailored to your specific financial situation and goals.
• Consider your risk tolerance: Choose investments that align with your comfort level.
• Review regularly: Periodically assess your investments to ensure they meet your evolving needs.
Remember: The best tax-saving strategy depends on your individual circumstances. It's essential to evaluate your financial goals, risk appetite, and time horizon before making investment decisions.

Ans: Yes good. However, keep upgrading your skills till you complete your BArch. All the BEST for Your Prosperous Future.

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Ans: Rishi, prefer CSE from DSATM. All the BEST for Your Prosperous Future.

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Ans: Please mention your college name & affiliated to which university?

Ans: Yes. However, keep upgrading your skills. Have a Professional LinkedIn Profile, keep updating them & put job alerts in it to know the job market trends to prepare yourself for Campus Recruitment or off-campus. All the BEST for Your Prosperous Future.

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Ans: Hello;

You may invest your corpus(15 L) in the proportion of 40:40:20 in the following type of mutual funds;

1. Flexicap fund(PPFAS flexicap fund)40%
2. Large and Midcap fund (Mirae Asset Large and Midcap fund) 40%
3. Small Cap fund (Nippon small cap fund) 20%.

These funds are proposed for long term horizon.

You may follow us on X at @mars_invest for updates.

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

Happy Investing!!

Ans: You’ve experienced a major financial setback with a business loss of Rs 1 crore and have since transitioned to a job with an annual income of Rs 24 lakh. Currently, you have a home valued at Rs 65 lakh but with an outstanding loan of Rs 40 lakh, and you’ve mentioned a costly school setup for your two children, with an annual fee of Rs 5 lakh. You also have a Rs 20 lakh mediclaim policy, which provides some security in terms of health coverage. Now, you are keen on clearing your debts, securing your children’s future, and building up a financial cushion.

Given your circumstances, it’s important to prioritize debt repayment, secure your children’s education, and rebuild your financial base. Here’s a step-by-step approach to achieving your goals.

1. Prioritize Debt Repayment
Paying Off the Home Loan
Your home loan of Rs 40 lakh is a significant liability. Considering that you pay Rs 5 lakh annually for your children’s education, this loan will be a major financial burden. However, paying off your home loan aggressively while maintaining your lifestyle is crucial for long-term stability.

Increase EMI Payments: Check if you can increase your home loan EMIs. You could redirect any excess income towards your home loan. Even a small increase in EMI can reduce your overall loan tenure, saving you substantial interest in the long run.

Lump Sum Prepayments: If you get any bonuses or financial windfalls, use them to make lump sum payments towards the principal. This will help reduce the loan quickly.

Refinance Your Home Loan: If your current interest rate is high, consider refinancing the loan to a lower interest rate. Even a small reduction in interest can lead to significant savings over the long term.

2. Build an Emergency Fund
Before starting any investments, you need to establish an emergency fund. This will prevent you from having to take on more debt in case of unforeseen expenses.

Target 6 Months of Living Expenses: Set aside enough money to cover at least 6 months of your family’s living expenses. This should include EMI payments, school fees, and day-to-day expenses. Aim for a fund of Rs 8-10 lakh for emergencies.

Place in a Liquid Fund: You can park this money in a liquid mutual fund or a high-interest savings account. The idea is that it should be easily accessible and provide some returns.

3. Address Kids’ Education
Your children are 9 and 8 years old, and their education is a significant ongoing expense. With annual fees of Rs 5 lakh, the costs are substantial.

Set Up a Dedicated Education Fund: You can begin a systematic investment plan (SIP) in mutual funds dedicated to their future educational needs. Equity mutual funds will provide the best growth over a 10-15 year period, but you’ll need to manage this carefully as they get closer to higher education.

Consider Education Insurance: Although you have a mediclaim policy, an education insurance plan can provide additional coverage in case something happens to you. This will ensure that their education is funded even if you're not around.

4. Start Long-Term Investments for Retirement
Since you have no current investments and a home loan to deal with, start slowly and steadily building your long-term savings. At 45, you have about 15-20 years until retirement, which is enough time to grow a retirement corpus if you act now.

Systematic Investment Plans (SIPs): Start with an SIP in equity mutual funds. Equity funds have the potential to give higher returns over the long term, which is crucial given the time frame. You can start small and increase contributions as your financial situation stabilizes.

Public Provident Fund (PPF): Consider opening a PPF account. Though it has a lower interest rate compared to equity, it provides tax benefits and a risk-free return. It’s ideal for building a portion of your retirement fund.

Voluntary Provident Fund (VPF): If your company provides EPF (Employee Provident Fund), consider contributing extra to the VPF. This will help build a tax-free retirement corpus.

5. Secure Health and Life Insurance
You already have a Rs 20 lakh mediclaim policy, which is good. However, with two young children, securing your family’s future through proper life insurance is critical.

Term Insurance: You should get a term insurance policy that covers at least 10 times your annual income. With a Rs 24 lakh annual salary, consider a Rs 2.5-3 crore term policy. This will ensure your family’s financial security if anything happens to you.

Review Mediclaim Policy: With rising medical costs, a Rs 20 lakh mediclaim policy may not be sufficient. Consider increasing the coverage to Rs 30-40 lakh, depending on your budget.

6. Manage Current Lifestyle and Expenses
Your children’s school fees are Rs 5 lakh annually, which is a significant part of your income. You’ll need to make sure that this expense does not derail your financial goals.

Budgeting: Create a strict budget to ensure that you are able to save and invest every month. Keep discretionary spending to a minimum until you are able to stabilize your financial situation.

Avoid Lifestyle Inflation: As your income grows, it’s important to avoid lifestyle inflation (increased spending as income rises). Prioritize savings and investments instead of increasing your standard of living.

7. Rebuild Your Financial Confidence
Given the business loss, it's understandable to feel financial strain, but you’re taking the right steps by focusing on your job and rebuilding your financial base. The key now is to be consistent and disciplined with your finances.

Stay Positive and Committed: You have the earning capacity and time to rebuild your financial portfolio. Stick to your investment and debt repayment strategies, and you’ll find that progress happens gradually.

Focus on Long-Term Goals: Short-term market fluctuations and financial hurdles may cause concern, but your goal should always be long-term financial stability and security for your family.

Final Insights
Focus on Debt Reduction: Prioritize paying off your home loan and avoid new debts. Use any excess income or bonuses to prepay the loan faster.

Build an Emergency Fund: Secure at least 6 months of expenses in an easily accessible emergency fund before you start investing.

Start Investing for Kids’ Education: Start an education fund with SIPs in equity mutual funds. This will help you cover the cost of their higher education.

Plan for Retirement: Begin SIPs in equity funds and open a PPF account for long-term retirement savings. Consider VPF contributions if available.

Secure Your Family: Increase health insurance coverage if needed and take a term insurance policy of Rs 2.5-3 crore for your family’s protection.

With disciplined savings, prudent investments, and focused debt repayment, you will be able to rebuild your financial future and secure your children’s education as well as your retirement.

Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
Holistic Investment YouTube Channel

Ans: Hello;

You are most welcome for seeking probable answers to your queries.

After the retirement of your father he may buy immediate annuity from a life insurance company. Considering annuity rate of 6% he can expect to receive a monthly payout of 20 K immediately from next month. (You can try to shop around and negotiate for a better annuity rate).

Out of the monthly payout of 20 K your parents may keep 10 K for own expenses and balance 10 K may be earmarked towards loan emi.

Since home loan emi is 33.5 K, I suggest yourself and your brother can share the balance amount(23.5 K) in equal proportion(11750 per person, per month).

As rightly pointed out your family should focus on early repayment of this home loan by pre paying the principal as much as possible.

If the loan repayment tenure is more than 10 years then yourself and brother may be added as co-owners of the property alongwith your father.

This can then enable yourself and your brother to seek income tax deductions on account of home loan repayment.

This will involve stamp duty, registration and legal expenses so it will make sense only if loan repayment term is more then 10 years.

It would be better if you seek advice from a CA to pursue this option.

Despite the monthly payout of 11750, you and your brother will have surplus funds to invest for other goals.

Good to know that your parents are covered under healthcare insurance.

Your parents may not have left a huge fortune for you both but they have ensured best education for you by virtue of which you are decently settled in life. Keep that in mind.

Happy Investing!!