How can I secure my retirement with no plan at 54?

HelloMr. Arora, I'm going to be 54 in May and have no retirement plan yet. As we have 2 budget stores 1 is going ok and other one we just started. I want to get around 4cr after 10 years. While our investments are my LIC is 84000 yearly for 20 years which will be matured in 2033 and 2034 SIP's are Axis ELSS Tax Saver Fund (G) 1000 p/m from 2020 Bank of India ELSS Tax Saver Fund Reg (G) 1500 p/m from 2022 Kotak Equity Opportunities Fund (G) 2500 p/m from 2022 Quant Small Cap Fund (G) 1500 p/m from 2022 my wife's SIP are Bank of India ELSS Tax Saver Fund Reg (G) 5000 p/m from 2024 Canara Robeco ELSS Tax Saver Fund Reg (G) 2500 p/m from 2021 Quant ELSS Tax Saver Fund (G) lumsum amount 2L in 2021 Union ELSS Tax Saver Fund (G) 2500 p/m from 2021 Value of above is today 11Lacs I also have shares and invested in it 3L, now a days its cost is 4Lacs besides that I have made 2 more small SIP's in nippon as well from this year. My wife is also working while I look after the stores. We have our own two houses (1Cr and 90Lacs) (both lone free.) One we bough last year with 33k EMI for next 20 years. I'll get 3L next year in july, one of my tax saving policy will be matured. I have big ancestral land in hills (agricultural but barren), will be cost 1Cr and one more an ancestral house. Can you please guide me about the investment, so we can diversify and make 4cr in another 10 years. We also have one small kid for him we have already taken 2 child eductional plans and for that we pay 1,25,000/- yearly seperately. Which he will get when he will be 18. Please guide me. regards Amy

Ans: Hello;

Your current monthly SIP of 16.5 K may grow into a sum of 40.7 L after 10 years.

The 11 L worth holding in mutual funds as on today may grow into a sum of 37.34 L after 10 years.

The 4 L worth share holding as on today may grow into a sum of 13.58 L after 10 years.

The LIC endowment policy may yield you a sum of 22.45 L in 2033.(Maturity)

Adding all these amounts we get a sum of 1.14 Cr after 10 years.

Supposing you sell your land property currently valued at 1 Cr and invest it lumpsum in a pure equity mutual fund then after 10 years you may expect a sum of 3.39 Cr. (Returns from mutual funds and equity considered at 13% and endowment insurance policy return assumed at 6%)

So your total corpus will become 3.39+1.14=
4.53 Cr.

Seek help from a mutual fund distributor or investment advisor to select appropriate funds for your requirement.

Happy Investing!!

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.

Ans: You have a solid foundation, and it’s commendable that you are managing two home loans while balancing various investments. Your monthly salary of Rs 2.4 lakhs and an EMI burden of Rs 1.6 lakhs shows you are carrying significant financial responsibility. However, generating Rs 40,000 from rent is helping reduce the impact of your EMIs.

Key highlights:

Monthly salary: Rs 2.4 lakhs
Two house EMIs: Rs 1.6 lakhs
Rent: Rs 40,000 per month
Investment portfolio: Rs 50 lakhs (Rs 20 lakhs in PPF, rest in stocks, SIPs, and MFs)
Annual schooling cost: Rs 1.2 lakhs
Other expenses: Holiday every 6 months, daily needs
No term insurance
Company health insurance only
While you have done well to invest Rs 50 lakhs, the lack of term insurance and the heavy EMI burden may be areas for improvement. Your goal of retiring in 10 years is achievable, but some adjustments will be necessary to optimize your portfolio and secure a comfortable future.

Investment Strategy Review
Let’s break down your current investments to better align them with your retirement goal in the next 10 years.

PPF (Public Provident Fund) - Rs 20 Lakhs
The PPF is a safe, long-term investment with tax benefits, but its returns are relatively modest. Over the next 10 years, this will continue to grow at a steady pace.

Action Plan:

Keep contributing to your PPF but avoid putting additional large sums.
PPF should be treated as part of your safe, low-risk portfolio.
Stocks, SIPs, and Mutual Funds (Rest of Rs 30 Lakhs)
Your exposure to equities through stocks and mutual funds will help you generate growth, but it needs diversification and regular review. SIPs in actively managed funds are ideal for long-term goals like retirement.

Action Plan:

Actively managed mutual funds: Ensure that the mutual funds you are invested in are diversified across sectors and are actively managed.
Avoid direct funds: Regular funds provide better tracking and advice from an MFD with CFP credentials, which is crucial for your long-term planning.
Review your stock portfolio: Individual stocks carry more risk than mutual funds. It is wise to regularly assess performance and sell off underperforming stocks.
Balance with debt funds: Include some debt funds for stability, especially as you approach your retirement goal.
Rental Income from Property
Your rental income of Rs 40,000 per month is a significant contributor to offset your EMIs. While real estate is not recommended as a new investment option, your existing property generating income can support your cash flow needs.

Action Plan:

Rent reassessment: Ensure you are getting market rent or consider raising it over time to adjust for inflation.
No additional real estate investments: Avoid tying more capital into real estate. Focus on growing your financial portfolio instead.
Critical Areas for Improvement
1. Lack of Term Insurance
It’s essential to secure your family’s future in case of any unexpected event. Currently, you do not have term insurance, which is a vital part of any financial plan.

Action Plan:

Immediate term insurance: Buy a term plan covering at least 10-12 times your annual income. This will ensure your family is financially secure if something happens to you.
2. Health Insurance Coverage
You rely on company-provided health insurance. This is risky, as you may lose coverage if you switch jobs or retire early. Having separate family health insurance will ensure consistent protection.

Action Plan:

Buy individual health insurance: Get family floater health insurance with adequate coverage for your entire family, ensuring lifelong renewability.
Supplemental critical illness cover: Consider adding critical illness coverage to protect against major health expenses.
3. EMI Management
You have significant EMIs totaling Rs 1.6 lakhs per month. While one property generates rental income, the overall EMI burden is high. Managing this will be crucial for freeing up cash flow for further investments.

Action Plan:

Prepay EMIs: Any surplus income should go toward prepaying your loans, starting with the one without rental income. Reducing this burden will ease your cash flow.
No additional loans: Avoid taking on any further debt to ensure your financial plan stays on track.
Retirement Planning
You aim to retire in 10 years, at age 52. With your current lifestyle and goals, your investments will need to provide enough to cover your post-retirement expenses. Here’s a strategy to ensure a comfortable retirement:

1. Estimate Future Expenses
Your current schooling costs are Rs 1.2 lakhs per year, and other living expenses include vacations and daily needs. Over the next 10 years, expenses will increase due to inflation, and you must account for these future costs when planning your retirement.

Action Plan:

Create a detailed budget: Track all your current expenses and project them for the next 10 years, considering inflation. This will give you a clearer picture of your financial needs after retirement.
2. Build a Retirement Corpus
With 10 years to go, you will need to create a solid retirement corpus. The Rs 50 lakhs you currently have, along with further investments, will need to grow substantially. Here’s how to optimize this growth:

Action Plan:

Increase SIP contributions: Start contributing more to your SIPs as soon as your EMI burden reduces. A higher SIP contribution in actively managed mutual funds will provide better growth potential over the next decade.
Diversify investments: Include a mix of large-cap, mid-cap, and flexi-cap funds to ensure a balanced risk-return profile. Actively managed funds, especially those recommended by a certified financial planner, will perform better than index funds or ETFs.
Regular portfolio review: Work with a certified financial planner to review your portfolio annually. Ensure your funds are performing as expected and make necessary adjustments.
3. Plan for Post-Retirement Income
After retirement, you will need a reliable source of income to meet your monthly expenses. Your investments must be structured to provide regular income, adjusted for inflation.

Action Plan:

Systematic Withdrawal Plans (SWP): Set up SWPs in mutual funds to provide a regular, inflation-adjusted income post-retirement.
Emergency Fund: Set aside a portion of your corpus in a liquid fund for emergencies. This will ensure you don’t have to liquidate long-term investments prematurely.
Final Insights
To achieve your goal of retiring in 10 years, you will need to fine-tune your investment strategy and reduce your EMI burden. Your current investments, while substantial, require diversification and a focus on growth-oriented funds.

Additionally, securing term insurance and individual health insurance is critical for protecting your family’s future. By prepaying your loans and increasing SIP contributions over time, you will be better positioned to build a retirement corpus capable of supporting your post-retirement lifestyle.

Finally, always remember that regular reviews with a certified financial planner are key to staying on track and adjusting for any changes in your financial situation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment