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Ramalingam

Ramalingam Kalirajan  |7122 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 24, 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
ss Question by ss on Oct 23, 2024Hindi
Money

Hi, Im male 52 years, an NRI and want to retire in about a years time. i have a flat which is worth 75lacs in India, around 50 lacs in FD, investment in equities 16 lacs and a mutual fund of around 10 lacs with a monthly sip of 17,000. i have about 30 lacs investment with relatives with some interest. around 35 lacs would be end of service benefits. have two children who are doing their higher studies in India, a daughter and a son 18 & 20 respectively. appreciate your advise the best monthly income that i should have with my savings. i have no other liabilities or loan.

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
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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Hello Hardik Bhai I am at 54 years in MNC. My monthly take home ~ ₹1.4 lacs + I have 2 flats that fetch rental income of ₹ ~ 50000/-. PF accumulation is around 60 lacs. Have home emi of 61000/- monthly and I am in a government flat (my wife government employee she has another 7 years of service). Make all effort to ensure that her salary is not touched.. have a daughter at 22 years. Based on her academic appetite and success have earmarked ~50 lacs for her higher education. Have investment in equity 15 lacs worth and gold around 50 lacs. Assuming I retire in another 6-7 years, how much I should ensure monthly income to maintain a present standard of of life without dependency. Your views on mutual fund etc. will be appreciated.. Thanks
Ans: Considering your profile and aspirations, here's a strategic overview:-

1. Current Income and Assets:
Monthly take-home: ?1.4 lacs
Rental income: ?50,000/-
PF accumulation: ?60 lacs
Equity investment: ?15 lacs
Gold holdings: ?50 lacs
2. Liabilities:- Home EMI: ?61,000/-
3. Future Goals and Commitments:- Daughter's higher education fund: ?50 lacs
4. Retirement Plans:- Target retirement in 6-7 years

Considering your retirement goal, let's outline a strategic approach:-

Monthly Income Requirement:- Assess your current monthly expenses and lifestyle to determine the income needed to maintain your standard of living. Factor in inflation for accurate projections.

Investment Diversification:- Given your time horizon, consider a balanced portfolio across mutual funds, including equity and debt. Diversification helps manage risk.

PF Utilization:- Evaluate the possibility of utilizing PF wisely for retirement income. Understand withdrawal rules and tax implications.

Real Estate Planning:- Given your rental income and property assets, review their potential for contributing to your retirement income.

Daughter's Education Fund:- Ensure your earmarked amount aligns with the expected cost of her education. Consider investment options with a medium-term horizon.

Risk Management:- Review your insurance coverage, including health and life insurance, to safeguard against unforeseen circumstances.

Financial Planner Consultation:- Engage with a certified financial advisor to create a detailed retirement plan. They can tailor strategies based on your unique situation and goals.

It's essential to periodically review and adjust your plan based on evolving circumstances. Connect with your financial planner for goal-based planning and a detailed explanation tailored to your unique situation.

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Ramalingam

Ramalingam Kalirajan  |7122 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 27, 2024

Asked by Anonymous - Jun 11, 2024Hindi
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I have post office deposit of Rs 50 lacs, FD : Rs 25 lacs, PPF : 40 lacs, MF : 40 lacs, NPS : 7 lacs & an extra flat current valuation : 40 lacs... I am 54..& want to retire. I need a monthly income of 1 lac... Pl suggest
Ans: Evaluating Your Current Financial Position
Assets Overview
Post Office Deposit: Rs. 50 lakhs
Fixed Deposit (FD): Rs. 25 lakhs
Public Provident Fund (PPF): Rs. 40 lakhs
Mutual Funds (MF): Rs. 40 lakhs
National Pension System (NPS): Rs. 7 lakhs
Extra Flat: Rs. 40 lakhs
Total Assets
Total Value: Rs. 202 lakhs (excluding flat)
Monthly Income Requirement
Required: Rs. 1 lakh per month
Income Generation Strategies
Fixed Income from Deposits
Post Office Deposit: Generate regular interest income.
Fixed Deposit (FD): Provides stable interest income.
Utilising PPF
PPF can provide tax-free returns but has withdrawal restrictions.
Consider partial withdrawals after maturity for supplementary income.
Systematic Withdrawal from Mutual Funds
Set up a Systematic Withdrawal Plan (SWP) for a regular income stream.
Choose funds with a stable return history.
Utilizing NPS
Annuity purchase with 40% of NPS at retirement.
The remaining 60% can be withdrawn lump-sum.
Evaluating Additional Sources
Rental Income from Extra Flat
Consider renting out the flat for additional income.
Expected rental income could be Rs. 15,000 - Rs. 20,000 per month.
Diversification and Rebalancing
Diversify investments to mitigate risks.
Rebalance portfolio regularly for optimal returns.
Suggested Financial Plan
Fixed Income Sources
Post Office Deposit: Approx. Rs. 25,000 - Rs. 30,000 monthly.
FD: Approx. Rs. 10,000 - Rs. 15,000 monthly.
Income from PPF
Withdrawals to be used as supplementary income.
Plan for withdrawals to align with monthly needs.
Mutual Funds SWP
Generate Rs. 30,000 - Rs. 35,000 monthly through SWP.
Select funds with consistent performance.
Rental Income
Expected Rs. 15,000 - Rs. 20,000 monthly.
Use this for regular expenses.
Annuity from NPS
Approx. Rs. 10,000 monthly post-retirement.
Lump-sum withdrawal to cover unexpected expenses.
Monitoring and Adjusting
Review financial plan annually with a certified financial planner.
Adjust withdrawals and investments based on market conditions and needs.
Final Insights
Ensure all income sources cover your monthly needs.
Keep a contingency fund for emergencies.
Regularly consult with a certified financial planner to stay on track.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |7122 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 20, 2024

Asked by Anonymous - Jun 20, 2024Hindi
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Monthly salary(wife+me) : 2 lakhs Monthly EMI : 74K Mutual funds : 3 lakhs Index funds : 4 lakhs PF : 8 lakhs Properties: 1+ carore value(2 flats+1 plot) I am 33 years old, Wants to retire at 45 years
Ans: It's wonderful that you're planning to retire at 45 years old. Early retirement is a dream for many, and with the right plan, it's definitely achievable. Let’s review your current financial situation and create a detailed roadmap for your retirement.

Current Financial Snapshot
Combined Monthly Salary: Rs 2 lakhs
Monthly EMI: Rs 74,000
Mutual Funds: Rs 3 lakhs
Index Funds: Rs 4 lakhs
Provident Fund (PF): Rs 8 lakhs
Properties: Rs 1 crore+ (2 flats + 1 plot)
Setting Clear Financial Goals
You’re 33 now and aim to retire at 45, which gives you 12 years to build a substantial retirement corpus. Early retirement means you'll need a larger corpus to sustain your lifestyle for a longer period without active income.

Evaluating Your Expenses and Savings
First, it's important to assess your current and future expenses. Your current monthly EMI is Rs 74,000, which is a significant portion of your income. The remaining Rs 1,26,000 should cover your household expenses, savings, and investments. Here’s what you need to consider:

Household Expenses: Track your monthly household expenses meticulously.
Savings Rate: Aim to save and invest at least 30-40% of your monthly income.
Emergency Fund: Ensure you have an emergency fund that covers 6-12 months of expenses.
Investment Strategy
Given your goal, a diversified investment strategy is crucial. Let's explore various investment options:

Mutual Funds
Mutual funds are a great way to build wealth over time. Actively managed funds are preferable over index funds because they can potentially offer higher returns. An experienced fund manager can navigate market ups and downs better than a passive index fund.

Disadvantages of Index Funds
Index funds, though cost-effective, simply mirror the market. They do not outperform it. They also don't adapt to market conditions or changes in economic scenarios. Actively managed funds, on the other hand, strive to outperform the market through strategic asset allocation and stock selection.

Regular Funds through MFD with CFP
Investing through regular funds via an MFD with a CFP credential ensures you get professional advice and personalized service. Direct funds might seem cheaper, but you miss out on the valuable guidance that can help you optimize your portfolio.

Equity Investments
Equity investments are crucial for high returns. Though volatile, they have the potential to significantly grow your wealth. Consider allocating a substantial portion of your investments to equity mutual funds, especially those managed by reputable fund managers.

Debt Instruments
Debt instruments provide stability to your portfolio. These include fixed deposits, bonds, and government schemes. They offer lower returns compared to equities but are essential for reducing risk and ensuring steady income.

Retirement Corpus Calculation
Without diving into specific calculations, here’s how you can approach building your retirement corpus:

Expected Returns: Equities can offer returns around 10-12% annually, while debt instruments may offer around 6-7%.
Inflation: Consider inflation, which erodes purchasing power. Factor in an inflation rate of 6-7% annually.
Savings Rate: Increase your savings rate as your income grows. Direct any bonuses, increments, or windfalls towards your retirement fund.
Managing Your Debt
Your monthly EMI of Rs 74,000 is a significant commitment. Ensure your debt-to-income ratio remains healthy. Paying off high-interest loans quickly can free up more funds for investments. However, home loans often have lower interest rates and tax benefits, so balancing between paying off the loan and investing is key.

Building an Emergency Fund
An emergency fund is your financial safety net. It should be liquid and accessible, ideally kept in a high-interest savings account or a liquid fund. This fund should cover at least 6-12 months of your expenses, ensuring you can handle any unexpected financial challenges.

Insurance Planning
Adequate insurance is essential for financial security. Ensure you have sufficient life and health insurance. Avoid investment-cum-insurance policies like endowment or ULIPs, which often offer lower returns. Instead, opt for term insurance for life cover and invest the rest in mutual funds.

Tax Planning
Effective tax planning can save you a significant amount of money. Utilize tax-saving instruments like ELSS mutual funds, PPF, and NPS. These not only reduce your taxable income but also contribute to your long-term wealth accumulation.

Regular Portfolio Review
Your investment portfolio should be reviewed regularly. This ensures your investments are aligned with your goals and risk tolerance. Market conditions and personal circumstances change over time, and your investment strategy should adapt accordingly.

Retirement Planning
Retiring at 45 means planning for a longer retirement period. Ensure your investments are sustainable and can provide a steady income post-retirement. Consider the following:

Systematic Withdrawal Plan (SWP): This allows you to withdraw a fixed amount from your mutual fund investments regularly, ensuring a steady income.
Post-Retirement Income: Plan for sources of income that will support your lifestyle post-retirement.
Building Wealth with Consistency
Consistency is the key to building wealth. Regular investments, disciplined saving habits, and prudent financial decisions will help you achieve your retirement goal. Avoid the temptation of quick-rich schemes and stick to your long-term plan.

Final Insights
Retiring at 45 is a bold and achievable goal. Focus on a diversified investment strategy, manage your debts wisely, ensure adequate insurance coverage, and regularly review your portfolio. Consulting a Certified Financial Planner (CFP) can provide the expertise needed to navigate complex financial decisions and optimize your retirement planning.

Best Regards,

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Chief Financial Planner

www.holisticinvestment.in

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I took home loan from HDFC of 10 years duration in May 2023. I told them that i will be able repay the loan in few months as i was planning to sell one plot of mine. Bank employee offered insurance on home loan with return of premium scheme telling me that as soon as you repay the loan all of the premium will be returned. I was old customer so i trusted her and took insurance. Later i came to know that no refund on that policy if you surrender in one year and 60 percent deduction after 02 years. My mistake that i overlooked freelook peroid and rate of return of premium in the documents. I have repaid my whole loan and woll be completing my policy tenure of 02 years in Apr 2025. What should i do to get maximum return of the premium and should i appeal to the higher authorities about the lie told by the employee or i accept the return and sit and regret my decision? Need your valuable advice
Ans: Hello;

You may register a grievance with ombudsman of the lender stating the facts of the matter clearly.

It is upto the discretion of lender's grievance management leadership to take appropriate view of this matter and decide suitably.

Because legally it will always boil down to, you have signed up for the policy after going through all the terms and conditions and also didn't reckon that anything is wrong during the free look up period so no discussion unless you manage to get a video clip of your conversation with the bank employee, which I believe is almost impossible.

Best wishes;

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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