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Can I retire at 51 with INR 1.3 Cr in investments?

Ramalingam

Ramalingam Kalirajan  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 05, 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 - Nov 05, 2024Hindi
Money

Dear Mr. Ramalingam Kalirajan, I am 51 years old, single with no dependent. currently I own a portfolio of INR 1.3 Cr in which 40 L is in MF and 10L in Bond and 10L in Gold. 50L in direct Shares and another 20L in Insurance (Ulip). apart from this I have a Flat which is worth of 60L. my Monthly expenses is around 40K, currently I am planning to retire, kindly let me know whether with this investment can I retire keeping life expectancy of 70-80 years. kindly advice.

Ans: It’s commendable that you’ve accumulated a substantial portfolio and are considering retirement thoughtfully. Let's evaluate each asset class within your portfolio to assess your retirement readiness.

Monthly Income Needs and Existing Assets

You mentioned monthly expenses of Rs 40,000.
Over a 20-30 year retirement period, inflation may gradually increase this amount. A sustainable withdrawal strategy will help address this.
Given a life expectancy of 70-80 years, a monthly income from investments is essential to meet your needs without depleting your corpus.
Mutual Funds

Your mutual fund corpus of Rs 40 lakh could play a key role in providing regular income.

Actively managed funds, unlike index funds, allow expert fund managers to navigate market conditions. They aim for growth even in uncertain markets.
These funds can also be diversified across equity and debt categories to maintain balance. Equity funds can support growth, while debt funds can offer stability and liquidity.
Suggested Action

Retain and build your mutual fund corpus. Regular funds through a Certified Financial Planner (CFP) and Mutual Fund Distributor (MFD) offer guidance, minimizing risk while aiming for returns.
Setting up a Systematic Withdrawal Plan (SWP) can provide monthly income in a tax-efficient manner. SWP helps maintain principal while generating steady cash flow.
Direct Share Investments

With Rs 50 lakh in direct shares, your exposure to the equity market is significant.

Direct shares can be volatile and may not always align with the cash flow needs of retirement.
However, with proper management, shares may serve as a growth engine in your portfolio.
Suggested Action

Gradually shift part of your direct shares to diversified equity mutual funds. They provide professional management, spreading risk across sectors and companies.
Review the remaining stocks for potential dividends. Dividend-yielding stocks can complement your monthly cash flow needs.
Bond Investments

Your Rs 10 lakh in bonds offers stability but limited growth. Bonds are more effective as a balance to higher-growth assets like equities.

Bonds have fixed interest, but they may not keep up with inflation. Over time, they could lose purchasing power.
Suggested Action

Retain some bonds for safety but consider partially reallocating to debt mutual funds. Debt funds offer liquidity and potentially better post-tax returns than traditional bonds.
Maintain a mix of short and medium-term debt funds. These provide safety while possibly enhancing returns over traditional fixed-income instruments.
Gold Holdings

Gold can serve as a hedge in times of market volatility, and your Rs 10 lakh in gold contributes to a diversified portfolio.

However, gold alone may not generate regular income. It is more useful for capital preservation.
Suggested Action

Keep your gold as a long-term hedge but avoid expanding your holdings in gold.
For income generation, focus on growth-oriented assets like equity or hybrid funds, which combine equity and debt in a balanced manner.
Insurance (ULIP)

Your Rs 20 lakh in a Unit Linked Insurance Plan (ULIP) provides both insurance and investment. However, ULIPs can come with high charges and may not yield optimal returns.

Suggested Action

It is advisable to consider surrendering or partially exiting the ULIP.
Reinvest the proceeds into mutual funds, which offer greater flexibility, transparency, and cost-efficiency. A term insurance policy can cover any remaining insurance needs.
Real Estate

You own a flat valued at Rs 60 lakh, which can provide security or rental income if required. However, real estate as an asset is typically illiquid, and immediate access to funds can be challenging.

Suggested Action

If rental income isn’t feasible, consider whether this asset aligns with your retirement goals. Selling the property can free up funds for more liquid investments.
Alternatively, keep it as a fallback option but prioritize liquid and income-generating investments for cash flow needs.
Creating a Sustainable Income Stream

To cover Rs 40,000 monthly expenses, an ideal approach is to create a mix of income sources from your portfolio:

A Systematic Withdrawal Plan (SWP) from equity and hybrid mutual funds could provide monthly income while maintaining the principal.
Dividends from shares, if selected well, can further support your cash flow.
For liquidity, a portion in debt mutual funds or bonds can cover emergencies.
Optimizing Tax Efficiency

Long-term capital gains (LTCG) on equity mutual funds above Rs 1.25 lakh are taxed at 12.5%, and short-term gains at 20%.
Debt funds, on the other hand, are taxed per your income tax slab.
Setting up withdrawals strategically can help minimize tax impact and extend the life of your corpus.
Maintaining Emergency Funds

Since you are planning for a lengthy retirement, set aside a portion of liquid assets as an emergency reserve. This could be a mix of cash, liquid mutual funds, and short-term debt funds.

A sufficient emergency fund provides a buffer without disrupting your main investment portfolio.
It ensures that you won’t need to liquidate assets in unfavorable market conditions.
Healthcare Planning

Without dependents, healthcare planning is crucial to address any unforeseen medical expenses. Consider a robust health insurance policy to minimize out-of-pocket costs.

If you already have health insurance, evaluate the coverage for adequacy.
Top-up plans can provide extra protection without a large increase in premiums.
Finally

Your retirement plan appears well-structured with diversified investments, yet a few refinements could ensure financial security. By consolidating your portfolio for income generation and stability, you can enjoy a comfortable and financially independent retirement.

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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I am 40 year old below is my portfolio, current monthly expenses is 80k. Monthly income 4.5 lacs including pf after taxes , investing 60k mf , 60k stocks , 1 lac in pf , PPF, ssy and lic. 1.5 lacs emi in site loan which has just started, which will be there for another 6 years. Me and my wife work in IT , having 5 year old daughter. Can we retire by 50 ? Own apartment loan paid off MF mix of small , mid , large and international - 70 lacs Direct coffe can stocks - 30 lacs PPF , PF , SSY , LIC - 1 CR
Ans: Retiring by 50 is an ambitious goal, but with careful planning and disciplined execution, it can be achievable. Here are some steps you can take:

Evaluate Your Financial Position: Review your current assets, liabilities, and investment portfolio. Ensure that you have a clear understanding of your financial situation.
Calculate Retirement Corpus: Estimate your desired retirement corpus based on your expected post-retirement expenses, inflation, and life expectancy. Consider consulting a financial planner for a detailed analysis.
Optimize Investments: Continue investing in a mix of mutual funds, stocks, and other instruments to grow your wealth. Since you have a diversified portfolio, ensure it aligns with your risk tolerance and investment objectives.
Accelerate Savings: Increase your monthly investments if possible to accelerate wealth accumulation. Consider reallocating resources from lower-yield assets to those offering higher returns, keeping risk in mind.
Debt Management: Focus on paying off your site loan within the next six years. Reducing debt will free up more resources for savings and investments.
Emergency Fund: Maintain an adequate emergency fund to cover unforeseen expenses. Aim for 6-12 months' worth of living expenses in a liquid and accessible account.
Plan for Contingencies: Consider factors like healthcare expenses, education costs for your daughter, and any other unforeseen events. Ensure you have adequate insurance coverage to mitigate risks.
Retirement Lifestyle: Define your desired retirement lifestyle and associated expenses. This will help you determine the size of your retirement corpus more accurately.
Regular Review: Periodically review your financial plan to track progress and make necessary adjustments. Stay informed about changes in tax laws, investment opportunities, and market trends.
Seek Professional Advice: Consider consulting a Certified Financial Planner to create a comprehensive retirement plan tailored to your specific goals and circumstances.
Remember, achieving early retirement requires discipline, sacrifice, and careful financial management. While it may seem challenging, with dedication and the right approach, you can work towards realizing your goal of retiring by 50.

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Ramalingam Kalirajan  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 16, 2024

Asked by Anonymous - May 15, 2024Hindi
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I am 41 years of age, i am invested about 40 Lakhs in stocks and about 60 Lakhs of total corpas in mutual funds which includes Rs.15,000 for HDFC balanced fund, Rs. 15,000 towards HDFC Top 100 and Rs.30,000 toward mirae asset large cap fund and Rs. 20,000 towards axis small cap fund and Rs 20,000 towards UTI index fund. Apart from this i have a FD of Rs.1Cr, sovereign gold bond of 5 lakhs and Rs. 30 Lakhs towaeds corporate bonds. I would like to retire by 45 with with monthly income of Rs. 1.5 lakhs. Please evaluate and tell me will i be able to achieve this
Ans: Embarking on the journey towards early retirement at 45 with a monthly income target of ?1.5 lakhs necessitates a thorough evaluation of your current financial portfolio and its alignment with your retirement aspirations.

Reviewing Your Current Investment Allocation
Your investment portfolio exhibits a diverse mix of assets, including stocks, mutual funds, fixed deposits (FDs), sovereign gold bonds, and corporate bonds. This diversified approach reflects a prudent strategy towards wealth accumulation and risk management.

Assessing the Suitability of Investment Choices
Your allocation towards stocks and mutual funds, totaling ?1 crore, signifies a substantial exposure to equity markets, which offer the potential for higher returns over the long term. However, it's essential to ensure that this allocation aligns with your risk tolerance and investment horizon.

Analyzing the Retirement Income Requirement
With a targeted monthly income of ?1.5 lakhs post-retirement, we must evaluate whether your current portfolio can generate sufficient passive income to meet this goal. This assessment involves projecting the potential income streams from your existing investments and identifying any gaps that need to be addressed.

Evaluating Retirement Readiness
Given your age of 41 and the desired retirement age of 45, it's crucial to ascertain whether your current savings and investment trajectory can facilitate an early retirement while sustaining your desired lifestyle. This evaluation entails stress-testing your retirement plan against various scenarios, including market volatility and inflationary pressures.

Crafting a Retirement Strategy
To bridge any potential income shortfall and bolster your retirement corpus, we may need to explore additional avenues for wealth accumulation. This could involve increasing your contributions to equity-oriented investments, optimizing tax-efficient strategies, and diversifying into alternative income-generating assets.

Providing Personalized Retirement Solutions
As a Certified Financial Planner, I specialize in tailoring bespoke retirement solutions that cater to your unique financial circumstances and aspirations. By leveraging a combination of investment vehicles, tax planning strategies, and retirement income streams, we can devise a robust plan to achieve your early retirement objective with confidence.

Conclusion: Striving Towards Financial Freedom
In conclusion, achieving early retirement at 45 with a monthly income of ?1.5 lakhs requires a strategic blend of prudent investing, diligent planning, and proactive portfolio management. Through a collaborative approach and personalized guidance, we can navigate the path to financial freedom, ensuring a secure and fulfilling retirement lifestyle for you.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Ramalingam

Ramalingam Kalirajan  |6968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 30, 2024

Money
Im 55yrs (NRI) and my Portfolio is as: - Rs.5.75/month Tax Free (to be increased to around 6.82 lakhs/pm soon) - Shall be working for another 10yrs atleast - End of Service Benefit Rs.1cr to Rs.1.25cr as minimum - Mutual Funds - Rs.1.5cr - FDs - 25 lakhs - Bajaj Allianz SIP - 17K/pm for 5yrs (just a year left). Maturity after another 5yrs. - ICICI - 2 Lakhs/yr for 7yrs (over). Maturity after another 5yrs - SBI Life - 6 lakhs/yr, for 5yrs (just started). Maturity after 5yrs after payment completed. - Property - Approx 12-15cr (based on real estate and land prices). Including own 2 stiorey, own 6 Bedroom House, 1 Flat, 2 Acres Land, and 700 sq mtrs Real Estate Land, 2 cars. - Gold - 1.5cr Liabalities: 3 Daughters marriage. Expenses around 75 lakhs (25 lakhs each, as all Gold already purchased). How can I retire after 65 with a monthly pension of 1 Lakh/pm
Ans: You are in a strong financial position with a well-diversified portfolio. Your focus on building assets through mutual funds, property, and insurance plans shows long-term planning. As you are 55 and planning to work for another 10 years, this gives you a substantial time frame to further build your retirement corpus. However, to meet your goal of Rs 1 lakh per month post-retirement, strategic adjustments in your financial plan are necessary.

Income and Assets
Current Monthly Tax-Free Income
You currently earn Rs 5.75 lakhs per month, which is tax-free, and this amount is expected to increase to around Rs 6.82 lakhs per month. This provides a healthy surplus for future investments and lifestyle needs.

End-of-Service Benefit (EOSB)
At the end of your employment, you expect a minimum of Rs 1 crore to Rs 1.25 crore as an end-of-service benefit. This lump sum will significantly contribute to your retirement corpus and must be invested wisely to generate income for your post-retirement years.

Mutual Fund Investments
You currently have Rs 1.5 crore invested in mutual funds. This is a good start, but it needs to be structured properly for wealth growth and income generation during your retirement phase.

Fixed Deposits (FDs)
You have Rs 25 lakhs in FDs. While FDs offer safety, their returns are generally lower, especially for NRIs, and may not keep pace with inflation. As you approach retirement, you should evaluate other secure options that can provide better post-tax returns.

Bajaj Allianz SIP and Insurance Plans
Your Bajaj Allianz SIP (Rs 17K/month for 5 years), ICICI plan (Rs 2 lakhs/year for 7 years), and SBI Life plan (Rs 6 lakhs/year for 5 years) are insurance-cum-investment products. These plans will mature in the next few years, adding to your corpus. However, the returns from such plans are generally lower compared to mutual funds. After maturity, you can consider reinvesting these amounts in more productive options.

Property Investments
Your real estate assets, including land, houses, and flats, are valued at approximately Rs 12-15 crores. While this is a significant asset class, liquidity can be an issue. You may not want to rely on these properties for regular income in retirement. Selling some of these assets to invest in more liquid instruments can help meet your retirement income goals.

Gold Holdings
You also have Rs 1.5 crore in gold. Gold is a good hedge against inflation, but it may not provide consistent income for retirement. It can be kept for long-term appreciation or as a safety net for emergencies.

Liabilities
Daughters' Marriage Expenses
Your plan to spend Rs 75 lakhs on your daughters' marriages is already well-funded through gold purchases. This removes a significant liability, allowing you to focus entirely on retirement planning.

Retirement Income Goal
Your goal is to retire at 65 with a pension of Rs 1 lakh per month. To achieve this, you will need to create a retirement corpus that generates a stable monthly income without depleting your principal over time. Assuming a 6-7% withdrawal rate after retirement, a corpus of Rs 2 crore to Rs 2.5 crore may be required to comfortably provide Rs 1 lakh per month for the rest of your life.

Steps to Reach Your Retirement Goal
1. Maximize Mutual Fund Investments
Asset Allocation: You should balance your portfolio between equity and debt. As you are 55, a 60:40 ratio of equity to debt may work best. Equity can help grow your corpus over the next 10 years, while debt will provide stability and reduce volatility as you approach retirement.

Growth-Oriented Funds: Continue investing in actively managed mutual funds, especially in the equity segment, to take advantage of market growth. Actively managed funds, unlike index funds, allow fund managers to select high-potential stocks that can outperform the market.

Debt Funds: Consider investing a portion of your corpus into debt mutual funds. These funds provide better tax efficiency compared to FDs, especially for NRIs, and can offer regular payouts post-retirement.

2. Reinvest Insurance Maturities
The Bajaj Allianz SIP and ICICI and SBI Life plans will mature in the next 5 years. These plans typically offer low returns compared to mutual funds. Once they mature, you can consider moving the maturity proceeds into more efficient options like debt mutual funds or balanced advantage funds, which provide growth with moderate risk.

Do not surrender these policies now, but plan on reinvesting the maturity amounts for long-term income generation.

3. Diversify Beyond Real Estate
Real estate is a significant portion of your assets, but it is not liquid. As you near retirement, having too much in illiquid assets can pose a problem. You could consider selling some real estate assets (like land or a flat) and reinvesting in mutual funds or debt instruments that can generate monthly income.

The property you hold can also be a source of rental income, but ensure it is sufficient and reliable. Rental yields in India are often low, so selling underutilized properties for better financial instruments may be more beneficial.

4. Create a Post-Retirement Withdrawal Strategy
Systematic Withdrawal Plan (SWP): After 65, you can convert a portion of your mutual funds into an SWP. This allows you to withdraw a fixed amount monthly while the rest of your portfolio continues to grow. It’s a tax-efficient way of creating a regular income stream without disturbing your overall corpus.

Balanced Advantage Funds: These funds can shift between equity and debt based on market conditions, providing a steady return. You could use these funds as part of your post-retirement strategy to generate consistent returns.

Debt Instruments for Stability: As you approach retirement, you should gradually increase your exposure to safer debt instruments. Long-term debt funds, corporate bonds, or even government bonds can offer regular income with lower risk.

5. Plan for Inflation
Inflation will erode the value of money over time. Rs 1 lakh per month today may not have the same purchasing power after 10 years. Therefore, your retirement corpus must grow at a rate that beats inflation. Equity investments, even during retirement, will help you keep pace with inflation.

Use part of your existing surplus income to further increase your equity investments over the next 10 years. Focus on large-cap and diversified equity funds, as these tend to perform well over the long term with relatively lower risk.

6. Emergency and Health Fund
Ensure you have an emergency fund in place, with 6-12 months of expenses in liquid instruments like debt mutual funds. This will protect your investments from being liquidated prematurely.

Health is a major concern post-retirement. Ensure you have adequate health insurance coverage for you and your family, especially since healthcare costs are rising. Review your health insurance policies to see if they will cover you after 65.

7. End of Service Benefit Investment
Your end-of-service benefit (Rs 1 crore to Rs 1.25 crore) will be a major component of your retirement corpus. Invest this amount strategically in a mix of equity and debt instruments to ensure long-term growth and regular income.

Consider placing a portion in hybrid or balanced funds that offer both stability and growth. These funds are designed to manage risk while giving you decent returns.

Final Insights
Your current financial standing is strong, but it can be further optimized. By making strategic reallocations in mutual funds and liquidating underperforming or illiquid assets, you can achieve your retirement goal.

Focus on building a diversified retirement corpus through a mix of equity and debt investments. Keep sectoral and thematic fund exposure limited to minimize risk.

Plan for inflation by continuing to invest in growth-oriented funds, and ensure your withdrawal strategy includes tax efficiency and regular income.

Reinvest insurance plan maturities into more productive funds, and sell some real estate if needed to enhance liquidity.

Finally, regularly review your portfolio, especially as you near retirement, to make adjustments according to market conditions.

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

..Read more

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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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