How Much Monthly Income Will Be Comfortable in 2030: 1 Daughter, Own House, Tier-2 City?

Ans: With a corpus of around 3.4 Cr, you can expect a monthly income based on a conservative withdrawal rate to preserve the principal. A common strategy is to withdraw 3-4% annually, translating to approximately 28,000 to 37,000 per month. However, market fluctuations and inflation can impact this income over time. Think of your corpus as a tree that provides shade and fruit; nurturing it wisely will help sustain a comfortable and steady income stream. Regular reviews with a financial advisor will ensure your income keeps pace with your needs.

Ans: Current Financial Snapshot
Age: 44 years

Monthly Income: Rs 2 lakh

Monthly Expenses: Rs 1.25 lakh

Savings:

FD: Rs 15 lakh
RD: Rs 20,000 monthly
Mutual Fund SIP: Rs 40,000 monthly (Total: Rs 30 lakh)
Lump Sum Investments: Rs 7 lakh
Stocks: Rs 5 lakh
PPF: Rs 3 lakh
Goals:

Retirement Age: 50 years (2030)
Child's Future: Consider future education and marriage expenses
Corpus Required for Comfortable Retirement
Estimating Retirement Corpus
1. Monthly Expenses Post-Retirement:

Current Expenses: Rs 1.25 lakh per month
Assumed Inflation Rate: 6% per annum
Expenses at Retirement: Rs 1.76 lakh per month (approx.)
2. Corpus Calculation:

Retirement Period: Assume life expectancy of 85 years (35 years post-retirement)
Required Corpus: The corpus should be able to generate Rs 1.76 lakh per month (inflation-adjusted) for 35 years.
Steps to Calculate Corpus
Annual Expenses Post-Retirement:

Rs 1.76 lakh * 12 = Rs 21.12 lakh
Future Value of Annual Expenses:

Adjust for inflation over 35 years.
Corpus Required:

Use retirement calculators to determine exact corpus.
Investment Strategy to Achieve the Corpus
1. Continue and Increase SIPs:

Current SIP: Rs 40,000 monthly
Increase SIP Amount: Gradually increase SIPs with salary hikes.
Equity Focus: Prioritize equity mutual funds for higher returns.
2. Maximize PPF Contributions:

Current PPF: Rs 3 lakh
Maximize Contributions: Contribute Rs 1.5 lakh per year to PPF for tax-free returns.
3. Lump Sum Investments:

Current Lump Sum: Rs 7 lakh
Future Investments: Allocate additional lump sums into diversified mutual funds.
4. Stock Investments:

Current Stocks: Rs 5 lakh
Diversification: Ensure a diversified stock portfolio to reduce risk.
5. Fixed Deposits and Recurring Deposits:

Current FD: Rs 15 lakh
Current RD: Rs 20,000 monthly
Reallocate Funds: Gradually shift FD and RD funds into higher-yield investments like mutual funds.
Child's Future Planning
1. Education Fund:

Estimate Costs: Plan for higher education costs, considering inflation.
Dedicated SIP: Start a dedicated SIP for child’s education.
2. Marriage Fund:

Estimate Costs: Plan for marriage expenses.
Long-Term SIP: Start a long-term SIP for marriage.
Final Insights
1. Regularly Review Investments:

Annual Review: Monitor and adjust your investments annually.
Consult CFP: Seek advice from a Certified Financial Planner for tailored guidance.
2. Tax Planning:

Maximize Deductions: Utilize available tax deductions to optimize savings.
Diversify: Ensure investments are tax-efficient.
3. Emergency Fund:

Maintain Liquidity: Keep an emergency fund equal to 6 months of expenses.
Easily Accessible: Ensure it is easily accessible.
4. Health Insurance:

Adequate Coverage: Ensure adequate health insurance coverage for you and your family.
5. Retirement Planning:

Sustainability: Ensure your retirement corpus is sustainable for at least 35 years.
Inflation-Proof: Plan for inflation-adjusted expenses.
By following these steps, you can aim to build a robust retirement corpus and secure a comfortable life in Chandigarh post-retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your current earnings of 70K per month if adjusted for inflation(6% assumed)10 years would be 1.25 L.

Assuming you will need 70% of that inflation adjusted value to cover your regular expenses in retirement so your monthly payout requirement will be 70% of 1.25 L=87.5K
A sip of 25 K for 10 years will yield you a corpus of 61.67 L.
A 6% annuity will yield you a monthly income of 30.8K.
If you have corpus available through other sources like EPF, PPF upto 1.13 Cr after 10 years then NO issue the current sip will suffice. (113+61.67=174.67)
A 6% annuity of 1.7467 Cr will yield you monthly payout of around 87.5K
Else you may need to do a sip of 32K for 15 years to reach targetted corpus.
It can be achieved in 10 years too but the sip amount comes to 71K more then your monthly income of 70K hence redundant. (All sip returns are assumed from an equity fund at a modest rate of 13%)

The LIC policy maturity proceeds can be used to purchase the flat as desired.

However more important goals before retirement are the education funding requirement for your children.

I hope you have made provisions towards the same.

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

If you need any further clarity, kindly revert.

Happy Investing!!

Ans: You are a 52-year-old NRI planning to retire in a year. You have built a diversified portfolio and financial assets. Your assets consist of:

A flat worth Rs 75 lakhs in India.

Fixed Deposits (FDs) worth Rs 50 lakhs.

Investment in equities valued at Rs 16 lakhs.

Mutual fund investments worth Rs 10 lakhs, with a SIP of Rs 17,000 per month.

Investment of Rs 30 lakhs with relatives, earning some interest.

You expect Rs 35 lakhs as end-of-service benefits.

You also have two children pursuing higher studies in India, a daughter (18 years) and a son (20 years). You have no other loans or liabilities, which is a great position to be in before retirement.

Assessing Your Retirement Income Needs
Since you are looking to retire soon, it's essential to plan for a stable and sustainable monthly income. You’ll need to ensure that your savings can support your post-retirement lifestyle, children's education, and other future expenses.

Given that you have Rs 136 lakhs (including FDs, mutual funds, equity, end-of-service benefits, and the investment with relatives), your retirement income should be carefully structured to last for the rest of your life.

Let’s break this down.

Suggested Allocation of Funds for Optimal Monthly Income
You should aim to achieve a balance between safety and growth, with a significant focus on capital preservation. Here’s how you can structure your savings:

1. Fixed Deposits (FDs) and Debt Instruments: Rs 60-70 Lakhs
Purpose: Safety and liquidity.

Allocation: FDs already make up Rs 50 lakhs of your portfolio. You may want to add Rs 10-20 lakhs from the end-of-service benefits to create a stable and low-risk base.

Returns: These will give you a predictable monthly income through interest payments.

Though FDs provide safety, the returns are not very high and are taxable as per your income slab. Therefore, having a mix of other low-risk instruments like short-term debt mutual funds or senior citizen saving schemes (SCSS) can further diversify your income sources.

Debt mutual funds, while taxable, offer more flexibility and better returns than FDs over time. This portion of your portfolio can be used for short-term needs and emergencies.

2. Equity Investments: Rs 16 Lakhs
Purpose: Growth and inflation protection.

Allocation: You already have Rs 16 lakhs in equity. Since equity markets are volatile, this portion of your portfolio should be left untouched for at least the next 8-10 years. It will help your overall corpus grow and provide inflation-adjusted returns.

Returns: Though volatile, equities tend to outperform other asset classes over the long term.

Keeping your equity investments intact is crucial to ensure your portfolio does not lose its value due to inflation over the long run.

3. Mutual Funds (MFs): Rs 10 Lakhs + Rs 17,000 Monthly SIP
Purpose: Balanced risk and return for the medium-term.
Your mutual fund investment of Rs 10 lakhs and monthly SIP of Rs 17,000 can be allocated to Balanced Advantage Funds (BAFs) or Hybrid Mutual Funds. These funds balance between equity and debt, offering moderate returns with reduced risk compared to pure equity funds. This will allow you to benefit from equity growth without taking excessive risk.

Since equity mutual funds with long-term capital gains (LTCG) over Rs 1.25 lakh are taxed at 12.5%, and short-term capital gains (STCG) at 20%, it is better to hold these funds long-term to avoid higher taxes. You can periodically withdraw from these funds to meet your monthly needs while keeping the bulk of your capital invested.

4. Investment with Relatives: Rs 30 Lakhs
Purpose: Additional income.

Returns: This investment earns some interest, which can serve as an extra source of income. However, relying on informal arrangements may not be as secure. You might consider reallocating this Rs 30 lakhs to a safer option, like a debt mutual fund or senior citizen savings scheme (SCSS), to ensure more stability.

This would diversify your income sources and offer better security than an informal investment.

5. End of Service Benefits: Rs 35 Lakhs
Purpose: Additional stability.

Allocation: Consider allocating Rs 20-25 lakhs of this amount into low-risk, income-generating instruments such as SCSS, which offer regular payouts and are government-backed. This can serve as a steady and guaranteed income stream for your retirement.

The rest of this money (Rs 10-15 lakhs) could be added to your mutual fund portfolio to allow for some growth potential while still maintaining a low-to-moderate risk profile.

Creating a Monthly Income Plan
Based on your assets, you could structure a monthly income plan from multiple sources:

FDs and Debt Mutual Funds: This would be your primary source of income. You could set up a Systematic Withdrawal Plan (SWP) from debt mutual funds, which allows you to withdraw a fixed amount monthly, providing regular income while keeping your principal relatively safe.

Mutual Fund SWP: You could also set up an SWP from your balanced advantage or hybrid funds. Since these funds balance both equity and debt, they offer stable returns with a moderate risk level.

Investment with Relatives: If you continue this arrangement, it can serve as an additional income stream. However, ensure that it’s secure and reliable.

Projecting Monthly Income from These Sources
To estimate the monthly income you can generate, here is a rough breakdown:

FDs and Debt Funds: These can generate interest or withdrawal income in the range of Rs 25,000-30,000 per month.

Mutual Fund SWP: From Rs 10 lakhs, you could withdraw Rs 10,000-15,000 per month without depleting your corpus significantly.

Investment with Relatives: Depending on the interest rate, this could give you an additional Rs 5,000-10,000 monthly.

End-of-Service Benefits: Once allocated, this could provide another Rs 10,000-15,000 per month, depending on the instruments chosen.

In total, your monthly income could range from Rs 50,000 to Rs 70,000, which can be adjusted for inflation over time. You can also choose to withdraw larger sums for one-off expenses if needed.

Managing Future Expenses for Your Children
Your children are in their higher studies, so it’s essential to have funds set aside for their education or other needs. You could create a separate education fund using part of your end-of-service benefits or other savings. This could be invested in a debt mutual fund or balanced fund to grow safely until they need it.
Final Insights
You are well-positioned for retirement with a balanced portfolio across various asset classes. However, some reallocation and restructuring can help you secure a steady income stream while keeping your capital safe.

Focus on creating a stable monthly income from FDs, debt mutual funds, and SWPs.

Retain equity and mutual fund investments for long-term growth and inflation protection.

Consider reallocating informal investments for more security.

Plan ahead for your children’s education needs and other future expenses.

Stay mindful of the tax implications of your income and investments as an NRI.

With these strategies, you can comfortably enjoy your retirement without financial stress.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment