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Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 23, 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
Asked by Anonymous - May 22, 2024Hindi
Money

Hi m 48 yrs old n going to retire at 60.With a monthly income of 1lak.M unmarried n would like to seek ur advice relating to my retirement plans. I hav an fd of 25 lakhs, a mutual fund of 5lak, monthly SIP of 10k,few stocks, a land worth 60lak n an nps of 35lak. I need ur financial expertise with the question relating to my wish for building rentals on my land without loan but the cost of construction is to costly n it will require for using up all my accumulated money which I started to doubt about the credibility of creating retirement plans from rentals. Is it financially wise to go ahead or should I just concentrate on increasing my investment with sip n fd. Thank you in advance.????????????

Ans: Comprehensive Retirement Planning for a Secure Future
Understanding Your Financial Situation
You are 48 years old and plan to retire at 60. You earn ?1 lakh per month. Your current investments include:

?25 lakhs in fixed deposits (FDs)
?5 lakhs in mutual funds
?10,000 monthly SIP
Few stocks
Land worth ?60 lakhs
?35 lakhs in the National Pension System (NPS)
You are considering building rentals on your land but are concerned about the high construction costs and its impact on your retirement funds.

Your dedication to securing your financial future is commendable. Balancing investments and planning for retirement is a complex task, and your thoughtful approach reflects your commitment.

Evaluating Rental Income from Property
High Construction Costs
Building rentals on your land without taking a loan is challenging due to high construction costs. It would require utilizing all your accumulated funds, leaving you with little to no liquidity for other needs.

Financial Risks
Investing all your money in construction poses significant financial risks. If the rental market declines, you may not achieve the expected returns. Additionally, maintenance and vacancy costs can impact your income.

Alternative Investment Strategies
Increasing SIP Contributions
Focusing on increasing your SIP contributions can yield better long-term returns. SIPs in diversified mutual funds help spread risk and generate steady growth. Consider gradually increasing your SIP amount as your income allows.

Fixed Deposits and Debt Instruments
Continue investing in fixed deposits and explore other debt instruments like corporate bonds and government securities. These provide stable returns with low risk, suitable for preserving your capital.

Benefits of Actively Managed Funds
Higher Potential Returns
Actively managed funds can outperform the market due to professional management and strategic asset allocation. Fund managers adjust portfolios based on market conditions to maximize returns.

Risk Management
Active fund managers implement risk management strategies to protect your investments. They can shift assets to safer options during market downturns, ensuring better stability.

Disadvantages of Index Funds and Direct Funds
Index Funds
Index funds, while low-cost, mirror market performance and do not provide above-average returns. They lack the flexibility of actively managed funds to adapt to market changes.

Direct Funds
Direct funds save on commission fees but lack professional guidance. Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) provides expert advice, helping you make informed decisions.

Retirement Planning with a Diversified Portfolio
Equity Mutual Funds
Allocate a portion of your investments to equity mutual funds for higher returns. Diversify across large-cap, mid-cap, and multi-cap funds to balance risk and reward.

Debt Mutual Funds
Invest in debt mutual funds for stable returns. These funds are less volatile and provide regular income, making them suitable for your retirement portfolio.

NPS Contributions
Continue contributing to your NPS account. The NPS offers tax benefits and a steady retirement income. Consider increasing your contributions for better compounding benefits.

Creating a Balanced Investment Plan
Asset Allocation
Maintain a balanced asset allocation strategy. Diversify your investments across equities, debt, and fixed deposits to mitigate risks and ensure steady growth.

Regular Review and Adjustment
Regularly review your investment portfolio. Market conditions and personal circumstances change over time, and adjusting your investments ensures they align with your goals.

Planning for Medical and Emergency Funds
Medical Insurance
Ensure you have adequate health insurance coverage. Medical emergencies can deplete your savings quickly. A comprehensive health insurance plan protects your financial stability.

Emergency Fund
Maintain a separate emergency fund equivalent to six months of expenses. This fund provides a safety net for unforeseen expenses without disrupting your long-term investments.

Creating a Legacy for Future Generations
Estate Planning
Develop a detailed estate plan to ensure your assets are distributed according to your wishes. Consult with a legal advisor to draft a will and set up trusts if necessary.

Financial Gifts
Consider making financial gifts to your family during your lifetime. This reduces potential estate taxes and allows you to see the benefits of your generosity.

Importance of Professional Guidance
Role of a Certified Financial Planner
Working with a CFP ensures you receive tailored advice. A CFP helps you create a strategic investment plan, select appropriate funds, and make necessary adjustments to achieve your goals.

Conclusion
Building rentals on your land might not be the best option due to high construction costs and associated risks. Instead, focus on increasing your SIP contributions, maintaining your fixed deposits, and diversifying your portfolio. Regularly review and adjust your investments with the help of a Certified Financial Planner. Your commitment to securing your financial future is admirable, and with a well-structured plan, you can achieve a comfortable and worry-free retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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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Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 21, 2024

Asked by Anonymous - May 20, 2024Hindi
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Hey it is Sumit aged 35 I am planning a retirement at age range of 45 - 50 My investment plannings are mentioned below 1) LIC which will mature in 2034 with amount of 29 lakh 2) one long term plan in sbi with 1 lakh premium ( High risk) every year which will give lum- Sum 1cr plus at age of 58 to my wife 3) one more long term plan of 10000 per month ( High Risk ) which will also give 1 CR plus at age of 60 to me My Net port folio of stock is currently 5 lakh and planning to invest 25 lakh from my side in next two year ( Note profit is not included ) I have one Land at home town and planning to buy one flat at working place Liability - around 18 lakh Kindly guide is it sufficient to take early retirement with monthly income after retirement near around one lakh
Ans: Sumit, it's commendable that you're planning ahead for your retirement at such a relatively young age. Let's evaluate your investment strategies and assess the feasibility of achieving your retirement goals.

Current Investment Portfolio
Your investment portfolio comprises a mix of insurance, long-term plans, stock investments, and property ownership. While each component has its merits, we'll explore if they align with your retirement objectives.

Evaluating Insurance Policies
Surrendering LIC Policies
Consider surrendering your LIC policies, which mature in 2034, and reinvesting the proceeds into more growth-oriented avenues like mutual funds (MFs). This move can potentially enhance your returns.

Risk Assessment of Long-term Plans
Evaluate the risk associated with the long-term plans for you and your wife. While aiming for a lump sum of Rs 1 crore+ sounds appealing, ensure the risk matches your risk appetite and financial goals.

Realigning Investments for Retirement
Reviewing Stock Portfolio
Assess your stock portfolio's growth potential and consider reallocating funds to diversified MFs for better risk management and potentially higher returns over the long term.

Addressing Liabilities
Mitigate your liability of around Rs 18 lakhs strategically. Consider leveraging your assets like land or the proposed flat purchase to optimize your financial position.

Feasibility of Early Retirement
Retirement Corpus Calculation
Calculate the total retirement corpus required to sustain your lifestyle post-retirement. Include factors like inflation, healthcare expenses, and any unforeseen contingencies.

Monthly Income Requirement
Estimate your monthly income requirement post-retirement, aiming for around Rs 1 lakh. Ensure your retirement corpus generates sufficient passive income to meet this target.

Surrendering LIC Policies for MF Investment
Advantages of MFs over Insurance
Mutual funds offer higher growth potential and flexibility compared to traditional insurance policies. They provide diversified exposure to various asset classes, catering to different risk profiles.

Consultation with a Certified Financial Planner
Seek advice from a Certified Financial Planner (CFP) to assess the optimal strategy for surrendering LIC policies and reinvesting in MFs. A CFP can provide personalized guidance tailored to your financial situation and goals.

Conclusion
Sumit, achieving early retirement with a comfortable monthly income is feasible with careful planning and strategic realignment of your investment portfolio. Surrendering LIC policies and reinvesting in MFs, along with prudent management of liabilities, can pave the way for a financially secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 23, 2024

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Good day sir. I am 45 years old earning a take home salary of 1.5Lakhs/ month. I also get a rent of Rs. 25K/ month. I have EPF of about 16 Lakhs, NPS of 4 Lakhs, PPF of 3 Lakhs, Have FD of 70 Lakhs, Mutual fund and stocks of 20 Lakhs. Also invested in Gold and the current value is 60 Lakhs. I have some retirement plans with current value of around 20 Lakhs. I have my own house and no need to pay rent. My current expenses of my family is around 60K/ month. I have few plots available which values to around Rs. 1.5 Crore. Can I sell the plot and invest the money as part of my retirement plan. Also I am Planning to retire after 8 years. What investments I need to make to have a peaceful retirement. Waiting for your advice.
Ans: Crafting Your Retirement Plan: A Comprehensive Approach

Hello! Thank you for entrusting me with the task of charting out your retirement journey. Let's delve into your current financial landscape and outline a strategy to ensure a peaceful retirement for you.

Assessment of Current Financial Status

Before we dive into the specifics of your retirement plan, let's take stock of your existing assets and liabilities. You're 45 years old, with a monthly take-home salary of ?1.5 lakhs and an additional rental income of ?25,000 per month. Your investments include:

EPF: ?16 lakhs
NPS: ?4 lakhs
PPF: ?3 lakhs
FDs: ?70 lakhs
Mutual Funds and Stocks: ?20 lakhs
Gold: ?60 lakhs
Retirement Plans: ?20 lakhs
Property Holdings (Plots): Valued at ?1.5 crores
Own House (No Rent Expense)
Monthly Family Expenses: ?60,000
Analyzing the Proposal to Sell the Plot

Considering your upcoming retirement in 8 years and your desire for a peaceful post-retirement life, let's evaluate the proposal to sell the plot and reinvest the proceeds into your retirement plan.

Pros of Selling the Plot:

Liquidity: Selling the plot would provide you with a significant influx of liquidity, which can be channeled into investment avenues with potential for growth and income generation.
Diversification: By diversifying your portfolio away from real estate, you can reduce concentration risk and enhance the overall stability of your investment portfolio.
Simplified Management: Real estate holdings often require active management and incur maintenance costs. Liquidating the plot would eliminate these hassles and streamline your financial affairs.
Cons of Selling the Plot:

Opportunity Cost: The decision to sell the plot involves foregoing potential future appreciation in property value. It's essential to weigh this opportunity cost against the benefits of diversification and liquidity.
Transaction Costs: Selling real estate typically entails transaction costs such as brokerage fees, stamp duty, and capital gains tax, which can impact your net proceeds from the sale.
Emotional Attachment: Real estate holdings often carry emotional significance, and parting with a property may evoke sentimental considerations that should be carefully weighed against financial objectives.
Retirement Planning Strategy

Now, let's outline a retirement planning strategy tailored to your unique circumstances and aspirations.

1. Goal Setting:

Define your retirement goals in terms of lifestyle aspirations, travel plans, healthcare needs, and any other post-retirement objectives you wish to accomplish.

2. Asset Allocation:

Allocate your investable assets across various asset classes such as equity, debt, and alternative investments, considering your risk tolerance, time horizon, and financial goals.

3. Investment Diversification:

Diversify your investment portfolio across multiple asset classes and investment vehicles to mitigate risk and enhance long-term returns.

4. Tax Planning:

Optimize your tax liabilities by leveraging tax-efficient investment avenues and retirement savings instruments such as NPS, PPF, and tax-saving mutual funds.

5. Regular Review and Rebalancing:

Periodically review your investment portfolio to ensure alignment with your retirement goals and risk appetite. Rebalance your portfolio as necessary to maintain the desired asset allocation.

Conclusion

In conclusion, while selling the plot may offer short-term liquidity and diversification benefits, it's essential to carefully weigh the pros and cons before making a decision. With a comprehensive retirement planning strategy encompassing goal setting, asset allocation, investment diversification, tax planning, and regular review, you can pave the way for a peaceful and financially secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 24, 2024

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Dear Sir, Thanks for your response. I am expecting a monthly income of Rs. 1 Lakh post retirement. Currently I am getting a rent of Rs. 25K and interest from FD of 45K which comes to around 70K. Apart from this I get 10K from plantation. So overall currently I am getting 80K which I am re-ivesting in FD's and MF's. Currently I am investing 1.3Lakh/month. I will be investing the same money for the next 8 years. Whether this will be sufficient to reach my retirement goal of Rs. 1 Lakh/month. Apart from this I have taken medical insurance coverage of Rs. 10 Lakh which I am paying from last 15 years and Term insurance of Rs. 1 Crore which will cover my family until my age becomes 65. Based on your valuable advice I have decided not to sell my plots currently and will look into it later during my post retirement dates. Waiting for your response. Regards, Krishna
Ans: Your prudent approach towards retirement planning is commendable. Given your current investment strategy and consistent monthly contributions, it's likely that you'll achieve your retirement goal of Rs. 1 Lakh per month.

However, it's crucial to periodically review and adjust your investment portfolio to ensure it remains aligned with your financial objectives. Your decision to retain your plots for future consideration reflects careful planning and foresight.
Continue to monitor your investments closely and seek professional guidance as needed to optimize your retirement strategy. Best wishes for a financially secure retirement journey!

Best Regards,

Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |3951 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 21, 2024

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Sir I am 61 years old. I am living with my wife, mother and a daughter in a rented (25k) house. I am getting 50,000/- as rent. My family earnings from Jewelry business about 50 lakhs annually, I am having deposit about 77 lakhs. Having family flotter policy (excepts for my mother )30 lakhs and top up 1 Cr. Purchased a site and 1.5 acres agricultural land recently. Wanted to retire (my self and my wife ) so how to plan investments.
Ans: You have a good foundation with your earnings, assets, and investments. Let’s discuss how you can plan your investments for a comfortable retirement for yourself and your wife.

Current Financial Overview
You have shared the following details:

Rent: Rs 25,000 per month.

Rental Income: Rs 50,000 per month.

Jewelry Business Income: Rs 50 lakhs annually.

Deposits: Rs 77 lakhs.

Health Insurance: Rs 30 lakhs family floater policy and Rs 1 crore top-up (excluding your mother).

Assets: Recently purchased site and 1.5 acres of agricultural land.

Retirement Planning Goals
Your primary goal is to plan for retirement, ensuring a steady income and financial security. Here’s how you can achieve this:

Maximizing Rental Income
You have a rental income of Rs 50,000 per month. This income can be a stable part of your retirement funds. Ensure your property is well-maintained to retain and attract tenants.

Utilizing Business Income
Your jewelry business generates Rs 50 lakhs annually. Consider transitioning the business management to a trusted individual or family member. This can provide a continued source of income without your active involvement.

Investment Strategy for Retirement
1. Fixed Deposits and Savings

You have Rs 77 lakhs in deposits. Fixed deposits are safe but offer lower returns. Diversify a portion of these funds into higher-yielding investments like mutual funds to ensure better growth.

2. Mutual Funds

Mutual funds can provide higher returns compared to fixed deposits. Invest in a mix of equity and debt mutual funds. Equity funds offer growth potential, while debt funds provide stability and regular income.

3. Systematic Withdrawal Plans (SWP)

Use SWPs from mutual funds to generate a regular income. SWPs allow you to withdraw a fixed amount periodically, ensuring a steady cash flow during retirement.

4. Health Insurance

Your family floater policy and top-up are good safeguards. However, ensure you have adequate coverage for your mother. Explore separate health insurance plans to cover her medical needs.

Diversifying Investments
1. Gold Investments

Consider investing in Gold ETFs or Sovereign Gold Bonds. These provide liquidity and returns without the risks associated with physical gold.

2. Agriculture and Site Investments

Your agricultural land and site are valuable assets. Ensure these are well-utilized or leased out to generate additional income.

Emergency Fund
1. Establishing an Emergency Fund

Ensure you have an emergency fund covering at least 6-12 months of living expenses. This fund should be in a highly liquid and safe investment like a savings account or liquid mutual fund.

Tax Planning
1. Efficient Tax Planning

Utilize tax-saving instruments to reduce your taxable income. Investments in ELSS funds, PPF, and health insurance premiums can help in tax savings.

Estate Planning
1. Will and Estate Planning

Ensure you have a will in place. This will help in the smooth transition of assets to your heirs. Consider consulting with a legal expert for estate planning.

Regular Monitoring and Review
1. Regular Monitoring

Regularly monitor your investments to ensure they are aligned with your retirement goals. Make adjustments as needed based on market conditions and financial needs.

2. Annual Review with CFP

Conduct an annual review with a Certified Financial Planner. This review will help in assessing your financial health, adjusting strategies, and ensuring you are on track to meet your goals.

Final Insights
You have a strong financial foundation with good income sources and investments. By diversifying your investments, utilizing systematic withdrawal plans, and regular monitoring, you can ensure a comfortable and financially secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Moneywize

Moneywize   |122 Answers  |Ask -

Financial Planner - Answered on Jun 25, 2024

Asked by Anonymous - Jun 13, 2024Hindi
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Ours is a family of 3 people -- My wife, I and my daughter who is 15. I am 39, my wife is 37 and our monthly expenses are Rs 90K. I own my house and expect to have no fixed income after 65 years, and expect to live till 75. Considering the ever increasing price rise what should be my corpus at 65 for me to continue living the life style I am living today?
Ans: Calculating your retirement corpus:

Here's how to estimate the corpus you'll need to maintain your current lifestyle after retirement:

1. Retirement period:

You plan to retire at 65 and expect to live till 75. So, your retirement period is 75 - 65 = 10 years.

2. Inflation adjustment:

You've rightly considered inflation. To estimate future expenses, we need to factor in inflation. A safe assumption for India is 5-7% inflation. Let's take an average of 6%.

3. Current monthly expenses:

You spend Rs 90,000 per month currently.

4. Future monthly expenses:

To find the monthly expense at retirement (at 65), we need to consider inflation for 26 years (39 years till retirement + 10 years retirement).

You can use an inflation calculator online or a simple formula:

Future monthly expense = Current monthly expense * (1 + Inflation rate)^number of years

In your case, Future monthly expense = Rs 90,000 * (1 + 0.06)^26 ≈ Rs 3,28,550 (approximately Rs 3.29 lakh)

5. Total corpus calculation:

Now you can calculate the total corpus needed. Here's a common approach:

Total corpus = Monthly expense * Number of years in retirement * 12 (months)

However, this method doesn't consider the fact that you'll be withdrawing money every month, reducing the corpus. A more accurate method is using the Time Value of Money (TVM) concept. There are online TVM calculators or Excel functions you can use.

Here's an alternative approach that provides a reasonable estimate:

Multiply the future monthly expense (Rs 3.29 lakh) by a factor considering inflation over the period. This factor can vary depending on your risk tolerance and investment strategy. A factor of 200 is often used as a conservative estimate.
Total corpus = Rs 3.29 lakh/month * 200 (factor) = Rs 6.58 crore (approximately Rs 658 million)

Additional factors to consider:

• Daughter's future expenses: Your daughter will be an adult by the time you retire. While she won't be financially dependent, consider any potential future support you might want to provide for her education or marriage.
• Healthcare costs: Healthcare expenses tend to increase with age. Factor in potential medical needs during retirement.
• Debt: If you have any outstanding debt by the time you retire, you'll need to account for its repayment in your corpus calculation.
• Investment returns: The corpus amount assumes a certain rate of return on your investments. Research different investment options and their potential returns to refine your calculations.

Recommendation:

Consult a financial advisor for a personalised retirement plan considering your specific financial situation, risk tolerance, and investment goals. They can help you create a more comprehensive plan and suggest suitable investment strategies to achieve your corpus target.

Remember, this is an estimate. Regularly review your plan and adjust it based on changing circumstances.

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IIT-JEE, NEET-UG, SAT, CLAT, CA, CS Exam Expert - Answered on Jun 24, 2024

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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