Myself and my spouse are working and have 2 kids 9 & 10 years. We are in our early 40 and acquired corpus of 3 cr. Max of corpus 2.3 crore is in EPF , PPF , Sukanya for both children and rest in NPS (75 % equity) and mutual fund. We have recently...

Myself and my spouse are working and have 2 kids 9 & 10 years. We are in our early 40 and acquired corpus of 3 cr. Max of corpus 2.3 crore is in EPF , PPF , Sukanya for both children and rest in NPS (75 % equity) and mutual fund. We have recently increased Mutual fund investment after our home loan finished and doing SIP in large and mid cap index funds. As we have more in debt investment due to EPF and PPF investment, is it wise to increase MF at this age. We are investing 6 laks PA in PPf and Sukanya account and are confused whether to reduce this amount and contribute more to MF. We have saving capacity of 15 lakhs per annum after our mandatory 12 % EPF contribution.

Ans: It's wonderful to hear about your diligent financial planning and the substantial corpus you've built for your family's future. Let's delve into your situation and offer some guidance:

• Firstly, kudos to you for prioritizing savings for your children's education and future through EPF, PPF, and Sukanya accounts. These investments provide a solid foundation for their financial security.

• Given your age and stage in life, it's essential to strike a balance between debt and equity investments. While debt instruments like EPF and PPF offer stability, equity investments through mutual funds and NPS provide growth potential.

• Review your investment portfolio periodically to ensure it aligns with your financial goals, risk tolerance, and investment horizon. Consider consulting with a Certified Financial Planner to assess your asset allocation strategy.

• With a saving capacity of 15 lakhs per annum, you have the flexibility to adjust your investment contributions. Evaluate whether reducing PPF and Sukanya contributions and increasing mutual fund SIPs is appropriate based on your financial objectives.

• Mutual funds offer the potential for higher returns over the long term, especially in equity-oriented funds. However, it's crucial to consider your risk appetite and investment horizon before making any changes.

• Diversification is key to managing risk in your investment portfolio. Ensure you have exposure to a mix of asset classes, including equities, debt, and possibly other alternative investments, to mitigate risk and optimize returns.

• Lastly, remember that financial planning is a journey, and it's okay to seek professional guidance when needed. A Certified Financial Planner can provide personalized advice tailored to your specific circumstances and help you make informed decisions.

• Keep up the excellent work with your savings and investments, and stay focused on your long-term financial goals. With careful planning and prudent decision-making, you're well-positioned to achieve financial success and provide a secure future for your family.

Ans: Planning for retirement is a crucial step, and it's commendable that you’re thinking ahead. With five years left until retirement and aspirations to move to Canada post-retirement, it's essential to create a well-rounded financial plan. Let’s dive into your current situation and see how best to navigate the next few years.

Assessing Your Current Financial Situation
You and your wife earn a combined monthly income of Rs 1.5 lakh. You have accumulated:

Rs 30 lakhs in fixed deposits (FDs)
Rs 30 lakhs in mutual funds (MFs)
Rs 8-9 lakhs in NPS/PPF
Rs 5 lakhs in PF account
These are solid savings, and they provide a good foundation for your retirement planning.

Fixed Deposits: Stability and Safety
Your Rs 30 lakhs in fixed deposits offer stability and guaranteed returns, which is excellent for preserving capital. However, FD returns might not outpace inflation, affecting your purchasing power over time.

Recommendation: Continue to hold FDs for safety and liquidity. They can be your emergency fund or short-term goal reserves.
Mutual Funds: Growth and Diversification
Your Rs 30 lakhs in mutual funds is a great move for growth. Mutual funds provide diversification and potential for higher returns compared to FDs. Given your current age, it's vital to balance between equity and debt funds to manage risk.

Actively Managed Mutual Funds
Actively managed mutual funds could be beneficial. Unlike index funds, these funds are managed by professionals aiming to outperform market benchmarks.

Benefits: Professional management, potential for higher returns, flexibility to adjust to market conditions.

Diversification: Spread investments across large-cap, mid-cap, and small-cap funds for balanced risk and return.

Systematic Investment Plans (SIPs)
Continuing SIPs in mutual funds can be a disciplined way to invest regularly and benefit from rupee cost averaging.

Advantages: Mitigates market volatility, consistent investment approach, and potential for long-term growth.
NPS/PPF: Secure and Tax-Efficient
Your Rs 8-9 lakhs in NPS and PPF are good for secure, tax-efficient savings. NPS offers a mix of equity and debt, providing a balanced growth approach, while PPF offers fixed returns with tax benefits.

Recommendation: Continue contributing to NPS for long-term growth and PPF for guaranteed returns and tax benefits.
Provident Fund (PF): Retirement Corpus
Your Rs 5 lakhs in the PF account is part of your retirement corpus, offering guaranteed returns and tax benefits.

Recommendation: Maintain your PF account and ensure you don't withdraw prematurely to maximize benefits.
Evaluating Additional Investments in Mutual Funds (Equities)
At 55, you’re at a stage where you need to balance growth and capital preservation. Investing more in equities can offer growth, but it also comes with higher risk. Here’s how to proceed:

Assessing Risk Tolerance
Understanding your risk tolerance is crucial. At this stage, a balanced approach between equity and debt is advisable.

Moderate Risk Approach: Allocate a higher proportion to debt funds and a moderate amount to equity funds.
Benefits of Investing in Mutual Funds Through MFD with CFP Credential
Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner (CFP) credential can offer several advantages:

Professional Guidance: Access to expert advice and tailored investment strategies.

Regular Monitoring: Ongoing portfolio management and adjustments based on market conditions.

Holistic Financial Planning: Comprehensive financial planning to align investments with your retirement goals.

Planning for Relocation to Canada
Relocating to Canada post-retirement is a significant decision that requires thorough financial planning. Here are key considerations:

Understanding Cost of Living
Research and understand the cost of living in Canada, including housing, healthcare, and daily expenses. This will help in estimating the retirement corpus needed.

Cost Consideration: Living expenses in Canada can be higher compared to India. Plan accordingly for a comfortable lifestyle.
Currency Exchange and Financial Transfers
Managing currency exchange rates and financial transfers between India and Canada is crucial to avoid potential losses.

Exchange Rates: Keep an eye on exchange rates and plan transfers to optimize value.

Financial Transfers: Use reliable financial institutions for transferring funds to minimize costs and ensure security.

Ensuring Adequate Insurance Coverage
Healthcare in Canada is different, and ensuring adequate health insurance coverage is essential.

Health Insurance
Evaluate your health insurance needs and ensure you have comprehensive coverage, including international coverage if needed.

International Coverage: Check if your current health insurance provides coverage in Canada. If not, consider additional international health insurance.
Building a Retirement Corpus
Creating a retirement corpus that can sustain you in Canada is crucial. Here’s a strategy to build and manage your corpus effectively:

Systematic Withdrawal Plans (SWPs)
SWPs from mutual funds can provide a regular income stream during retirement, ensuring a steady cash flow.

Regular Income: SWPs offer a fixed monthly income while keeping your capital invested and growing.
Dividend-Paying Stocks and Funds
Investing in dividend-paying stocks and mutual funds can provide regular income through dividends, supplementing your retirement corpus.

Stable Income: Dividends offer a steady income stream, which is especially beneficial during retirement.
Managing Post-Retirement Income
Ensuring a steady income post-retirement is crucial. Here are a few strategies:

Income from Investments
Diversify your investments to generate income through various sources like mutual funds, stocks, and fixed deposits.

Diversified Income: Multiple income streams reduce risk and ensure financial stability.
Tax Planning
Effective tax planning can help you maximize your post-retirement income and reduce tax liability.

Tax-Efficient Withdrawals: Plan withdrawals in a tax-efficient manner to minimize tax impact.
Inflation Protection
Protecting your retirement corpus from inflation is essential to maintain your purchasing power.

Equity Investments
Equity investments typically offer returns that outpace inflation, making them a good choice for long-term growth.

Inflation Hedge: Equities provide a hedge against inflation, ensuring your corpus retains its value.
Final Insights
Planning for retirement at 60 with the intention to move to Canada requires a balanced and strategic approach. Your current savings, including Rs 30 lakhs in FDs, Rs 30 lakhs in mutual funds, Rs 8-9 lakhs in NPS/PPF, and Rs 5 lakhs in PF, provide a strong foundation.

Focus on maintaining a balance between growth and capital preservation. Actively managed mutual funds and SIPs can offer growth, while NPS, PPF, and FDs provide stability and tax benefits. Investing through a CFP can enhance your portfolio management and financial planning.

Ensure you have adequate insurance coverage, including health insurance, for your time in Canada. Plan for currency exchange and financial transfers to manage your funds efficiently.

Building a retirement corpus that sustains your lifestyle in Canada requires careful planning and diversification of income streams. Systematic withdrawal plans, dividend-paying stocks, and mutual funds can provide regular income.

Protect your corpus from inflation through equity investments and effective tax planning to maximize your post-retirement income.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in