I have income of 2.5 lac per month, I have investment of 1.5 lac per year in PPF account and 10k in mutual fund every month. I have also 60 lac of FD, I'm 34 years old and planning to retire in age 45 year. How to duversified my investment so that I can get atleast 80k per month after my retirement?

Ans: Hi, it’s great to see you planning for your retirement at an early age. You have a substantial monthly income of Rs 2.5 lakh, and you are already investing wisely. Your goal is to retire at the age of 45 and have a monthly income of at least Rs 80,000 post-retirement. Let’s analyze your current financial situation and create a comprehensive investment plan to achieve your goals.

Analyzing Your Current Financial Position
You are in a strong financial position. Here’s a breakdown of your current investments:

Monthly Income: Rs 2.5 lakh
PPF Investment: Rs 1.5 lakh per year
Mutual Fund Investment: Rs 10,000 per month
Fixed Deposit (FD): Rs 60 lakh
Investment in PPF
Public Provident Fund (PPF) is a safe investment with good returns and tax benefits:

Safe and Secure: PPF offers guaranteed returns backed by the government.
Tax Benefits: Investment in PPF qualifies for tax deductions under Section 80C.
Long-Term Growth: PPF has a lock-in period of 15 years, promoting long-term savings.
Mutual Funds Investment
Mutual funds are an excellent way to diversify your portfolio and achieve higher returns:

Diversification: Reduces risk by investing across various sectors.
Higher Returns: Actively managed funds can outperform index funds and generate higher returns.
Professional Management: Fund managers make informed investment decisions.
Fixed Deposits
Fixed Deposits (FDs) offer safety and assured returns, but lower returns compared to other investment options:

Safety: FDs provide guaranteed returns with low risk.
Liquidity: Easy to liquidate in case of emergencies.
Lower Returns: Returns on FDs are lower compared to equities and mutual funds.
Diversifying Your Investment Portfolio
To achieve your goal of Rs 80,000 per month post-retirement, you need a diversified investment strategy. Here’s how you can diversify your investments:

1. Increase Mutual Fund Investments
Mutual funds should play a significant role in your portfolio for higher returns:

Equity Mutual Funds: Allocate more to equity mutual funds for long-term growth.
SIP: Increase your monthly SIP amount from Rs 10,000 to Rs 30,000 to Rs 40,000 gradually.
Review Performance: Regularly review and rebalance your mutual fund portfolio.
2. Balanced Funds
Balanced funds can offer a mix of equity and debt for moderate risk and returns:

Moderate Risk: Balanced funds reduce risk by investing in both equity and debt.
Steady Returns: They provide steady returns and capital appreciation.
3. Debt Funds
Debt funds offer stability and regular income:

Stability: Debt funds are less volatile compared to equity funds.
Regular Income: They provide regular income through interest payments.
Diversification: Include debt funds to balance the overall risk in your portfolio.
Retirement Planning
To ensure a comfortable retirement, you need to plan strategically:

1. Estimate Retirement Corpus
Estimate the total amount needed for retirement considering inflation and lifestyle:

Current Expenses: Calculate your current monthly expenses.
Inflation: Factor in inflation to estimate future expenses.
Retirement Corpus: Determine the total corpus needed to generate Rs 80,000 per month post-retirement.
2. Systematic Withdrawal Plan (SWP)
An SWP in mutual funds can provide regular income post-retirement:

Regular Income: SWP allows you to withdraw a fixed amount regularly from your mutual fund investments.
Tax Efficiency: SWP can be more tax-efficient compared to other income sources.
Insurance Needs
Evaluate your insurance policies to ensure adequate coverage for you and your family:

Life Insurance: Adequate coverage to protect your family financially.
Health Insurance: Comprehensive health insurance to cover medical expenses.
Surrender Policies: If you hold LIC, ULIP, or investment-cum-insurance policies, consider surrendering and reinvesting in mutual funds for better returns.
Emergency Fund
Having an emergency fund is crucial for financial security:

Liquidity: Ensure it covers 6-12 months of living expenses.
Accessibility: Keep it in easily accessible accounts like savings accounts or liquid funds.
Peace of Mind: Provides financial security during unexpected situations.
Tax Planning
Efficient tax planning can save you money and increase your returns:

Tax-Saving Mutual Funds: Invest in ELSS funds for tax benefits under Section 80C.
Long-Term Capital Gains: Plan your investments to take advantage of lower tax rates on long-term capital gains.
Tax-Advantaged Accounts: Utilize tax-advantaged accounts like PPF and NPS for additional tax benefits.
Planning for Inflation
Inflation erodes purchasing power over time. Here’s how to counter it:

Growth Investments: Invest in assets that grow faster than inflation, like equity mutual funds and stocks.
Regular Reviews: Regularly review and adjust your investments to stay ahead of inflation.
Monitoring Progress
Regularly monitoring your investment progress is crucial:

Annual Review: Conduct a detailed review of your portfolio annually with your CFP.
Adjustments: Make necessary adjustments based on performance and changing financial goals.
Stay Informed: Keep yourself updated on market trends and investment options.
Future-Proofing Your Investments
Future-proof your investments to ensure long-term financial security:

Diversified Portfolio: Maintain a diversified portfolio to manage risk.
Professional Guidance: Seek regular advice from a Certified Financial Planner.
Flexibility: Be flexible with your investment strategy to adapt to changing market conditions.
Final Insights
You have a strong financial base and clear goals for retirement. By diversifying your investments, increasing mutual fund contributions, and planning for taxes and inflation, you can achieve your goal of Rs 80,000 per month post-retirement.

Remember, investing is a journey. Staying informed, disciplined, and seeking professional guidance will help you reach your financial destination. Good luck!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in