Should I retire at 38 with 50 lakhs corpus and 30k monthly pension?

Dear Ramalingam Kalirajan Sir, First of all I am very thankful to you for your prompt response and valueable advice. Sir this was my first question so I couldn't elaborate some main aspects properly. Due to this i am writing this follow up question. I would be thankful to you for your patience to read the long question and appropriate reply. Sir, as told in my previous question, I started earning with Central Govt since the age 18 in 2006 with a meagre salary of 5400 per month. I had dependents at that time in my family my widow mother and a four years younger to me sister. I managed my sister expenses of studies as well as her marriage in 2018. Now, she is working at London UK and in case of emergency for me she intend to help me financially with atleast 8-10 Lakhs. So coming back to my main financial status, I am currently earning Rs 90000 a month and intends to retire in June 2026 after serving for 20 years with a likely corpus of 50 Lakh and a monthly pension of Rs 30000 which will be linked with Central govt dearness relief and will get increased as and when DA is revised. On a maximum I require 20 Lakhs for house repair and will be left with an amount of 30 Lakhs. My current mutual fund holdings are as follows :- Axis Bluechip Fund - SIP 1000 PM current value 70000 Axis Mid Cap Fund - SIP 1500 PM current value - 64000 Nippon India Multicap Fund - SIP 550 per month current value 21000 SBI Nifty SMALL cap index fund - SIP 2000 per month current value - 29000 So the total investments in mutual fund are Rs 5050 per month which I want to continue for atleast 10 years from now onwards. Post Office MIS investment - 4 Lakh earning an interest of Rs 2466 per month which I invest completely to my daughter's SSY every month. And the current value of SSY - 118000. Sir as I am serving in defence we have a scheme to invest retirement fund to govt which is 100% safe and likely to earn an interest of 700 per Lakh every month. I wish to invest Rs. 10 Lakh to this scheme which will earn me 7000 per month along with my pension. Total - 37000 a month. As I tracked current monthly expenses are 28000 house expense + 5050 mutual funds and + 5000 I am giving to my wife monthly out of which she invests 1000 in Post office PLI scheme and likely to get 1 Lakh in 2027 and 2 Lakh in 2032. Sir after house repair and investing in Govt scheme I will be left with 20 Lakh only with a month Interset income of 7000 and pension of 30000. Having gold jewellery worth 5-5.5 Lakhs. Sir till I am serving here I have a life insurance of 60 Lakhs but after retirement or 6 months before that I wish to purchase a term plan for me. Me and all my dependents including mother will be covered by ECHS and we will be getting treatment at MHs also. Sir, now my question is as I have the option to serve till the age of 57 years that is till 2045, still I wish to leave the service at the age of 38. Is this a wise decision financially? Also, my wife is a post graduate and she wishes to start teaching after my retirement and may earn Rs 10000 a month atleast. I am also a graduate and can work for another 10 years if I find something interesting. Also, is my current mutual fund investment right and shall I continue in the same funds for another 10 years So considering all this you are requested to guide me further. I shall be highly thankful to you.

Ans: Sukhvinder. Your financial situation shows a strong foundation with thoughtful planning in place. However, retiring early at 38 needs a thorough analysis. Here are some key points to consider:

Retirement Age: While you can serve till 57, retiring at 38 depends on whether your pension, interest income, and potential earnings will sustain your lifestyle long-term, especially considering inflation and rising costs.
Mutual Funds: Your SIPs are well-diversified. Continuing them for 10 years should help you build a robust corpus, but periodic reviews with a CFP are advisable to ensure they align with your goals.
Term Insurance: Purchasing term insurance before retirement is crucial for securing your family’s future.
Wife’s Potential Income: Your wife's future income can help reduce financial strain post-retirement, but you’ll still need to ensure your long-term security.
For personalized planning and comprehensive advice, I strongly recommend consulting a Certified Financial Planner (CFP) to evaluate all aspects and ensure your early retirement is financially sustainable.

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

Ans: It’s great to see that you and your wife are disciplined savers and investors. Your current portfolio is well-structured with a balanced approach across different asset classes. Let's analyze and address your queries systematically.

1) How Much Money Do You Need Post-Retirement?
Your goal is to retire at age 55 with a life expectancy of 90 years. This means you are planning for 35 years of post-retirement life.

Your current monthly expenditure is Rs 80,000. Post-retirement, expenses may rise due to inflation. To plan accurately, considering a realistic inflation rate of around 6-7% is essential.

Therefore, you need a corpus that can generate enough income to sustain your lifestyle for 35 years. The target retirement corpus should be able to cover both your monthly expenses and potential medical emergencies.

You may also want to factor in inflation and potential increase in healthcare costs over time, which can take up a substantial portion of your budget post-retirement.

2) How Much Monthly SWP to Support Rs 80,000 Monthly Expenditure?
Once you retire, you can use Systematic Withdrawal Plans (SWPs) from mutual funds to receive a monthly income. Your current expenditure is Rs 80,000/month, which will need to be adjusted for inflation by the time you reach 55.

SWPs allow you to withdraw money regularly while keeping the remaining balance invested, which helps the corpus continue to grow. Ideally, you should withdraw an amount that does not deplete your portfolio too quickly.

If inflation is considered, the equivalent of Rs 80,000 today could be much higher by the time you retire. A corpus that generates Rs 1.5 lakh per month would be a good target. It’s advisable to have a large enough corpus that supports your lifestyle, even as costs rise over time.

You may need to gradually increase your SWP withdrawals over the years to ensure you keep up with rising expenses.

3) Is Company-Sponsored Health Insurance Sufficient?
While your company-sponsored health insurance of Rs 10 lakh covers your family for now, it’s important to consider having additional coverage. As you approach retirement, relying solely on company-sponsored health insurance may become risky.

Healthcare costs rise significantly with age, and a medical emergency could strain your finances if your coverage is inadequate.

Here’s why you should consider purchasing a separate health insurance policy:

Post-retirement health needs: Medical costs tend to increase with age, and company-sponsored insurance might no longer be available after retirement.

Inflation in healthcare: Healthcare inflation is higher than normal inflation, so you may need more coverage over time.

Consider a family floater health policy of Rs 20-30 lakh with top-ups as a backup plan.

This will ensure you are well-covered in case of any unforeseen medical situations, even after retirement.

4) Is Rs 1.5 Crore Term Insurance Sufficient Post-55?
You plan to purchase a term insurance policy of Rs 1.5 crore in April 2025. This is a good step to protect your family’s financial future. However, after the age of 55, your need for life insurance may reduce, as by then, you may have accumulated a substantial retirement corpus and other assets.

Here are a few factors to consider:

No loans: After the age of 55, you’ll likely have paid off your home loan and car lease, reducing the financial burden on your family.

Reduced liabilities: By 55, your children might become financially independent, reducing the need for large coverage.

However, Rs 1.5 crore term insurance for the next few decades is still a good option, especially if your retirement corpus falls short or you wish to leave behind a financial legacy for your children.

If your financial goals are on track and your corpus is adequate, you may consider reducing your insurance coverage post-55. For now, however, Rs 1.5 crore should be sufficient to cover your family’s needs in case of an unfortunate event.

5) What Would Be the Rough Inflation Rate to Consider?
Inflation plays a significant role in determining the real value of your savings over time. Historically, the average inflation rate in India has been around 6-7%.

For long-term financial planning, it’s safe to assume a 6-7% inflation rate while calculating your retirement corpus. Healthcare inflation is usually higher, often around 10-12%, so it’s crucial to account for that separately when planning for medical expenses post-retirement.

If inflation remains high, you’ll need to increase your investments accordingly to ensure your post-retirement income keeps up with rising costs.

6) Portfolio Suggestions and Modifications
Your portfolio is well-diversified with a focus on debt, mutual funds, and real estate. However, there are a few areas where minor adjustments can help you achieve your goals more efficiently.

Debt Investments (24% of Income):
You are currently investing a significant amount in debt instruments like PF, VPF, PPF, and SSY. These offer steady returns but may not beat inflation in the long run.

Your debt portion (24% of income) is appropriate given your age, but as you approach retirement, you may want to gradually increase your allocation to debt for capital preservation.

Continue with NPS Tier 1 contributions as this will provide tax benefits and help build a retirement corpus.

Mutual Fund Investments (35% of Income):
You have a good mix of large, mid, and small-cap mutual funds. However, you could consider slightly increasing the large-cap allocation as you approach your retirement age for stability.

Ensure you are investing in actively managed mutual funds rather than index or direct funds, as actively managed funds can outperform the benchmark over time.

Debt funds can offer better returns than RDs. You may want to consider increasing your allocation to short-term debt funds or dynamic bond funds for relatively safer returns compared to traditional bank RDs.

Loans (24% of Income):
Your loan EMIs are well within a reasonable portion of your income.

Since you plan to step up your SIPs by 10% once the loans close in 4 years, this is an excellent strategy to increase your investments while being debt-free.

Real Estate:
You have made some good investments in real estate with two plots and a flat. The current value of your flat (Rs 1.1 crore) and plots (total value Rs 45 lakh) gives you a significant real estate holding.

Since you already have multiple properties, it may be better to focus on financial assets (mutual funds, debt instruments) for future investments.

Insurance:
As discussed earlier, consider purchasing additional health insurance for your family.

The Rs 1.5 crore term insurance is sufficient for now, and you can review it post-retirement.

Final Insights
You are on the right track with your financial planning. Your portfolio is well-balanced, and you have a disciplined approach to savings and investments. A few key steps can further strengthen your financial position:

Increase health coverage beyond company-sponsored insurance.

Continue to step up your SIPs by 10% after your loans close.

Stick to actively managed mutual funds for higher potential returns over index funds or direct funds.

Plan your SWP carefully to ensure your post-retirement income keeps pace with inflation and healthcare needs.

Your current financial situation and discipline in managing expenses set you up for a comfortable retirement. With a few adjustments, you’ll be well-prepared to achieve your financial goals.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/

I am Working as central government employee. I am married and have no children. My wife is a home maker. I am sharing comprehensive details about my investments in various mutual funds for your review. In addition to the mutual funds, here is a summary of my current financial situation: Recurring Deposits: I have bank recurring deposits totaling approximately ?8 lakhs. Income and Expenditure: Monthly Net Income: ?95,000 (after TDS, NPS and other deductions) Monthly Expenditure: My monthly expenses range from ?45,000 to ?50,000. This amount does not include the EMI for my land investment. NPS Contribution: Monthly Contribution: ?22,000 (This includes both employee and employer contributions.) Current NPS Holdings: ?21 lakhs I have recently transitioned my NPS fund management to HDFC Pension Management Company which has following allocation: Equity: 49.64% Corporate Debts: 30.21% Government Securities: 20.15% Real Estate: Co-own a land for which I have availed loan from bank with EMI of Rs. ?19,000 per month Insurance: Have term insurance of Rs. 1cr, (I am planning increase cover to 2 Cr.) Family is covered under Central Government Health Scheme (CGHS) which is reimbursement type facility (not cashless). MUTUAL FUND PORTFOLIO MFs where SIPs are discontinued 1. Axis ELSS Tax Saver Fund- Invested lump sum Rs. 75,000/- in Feb & March 2020 2. Canara Rebeco ELSS Tax Saver Fund- Currently invested Rs. 53,000-/- 3. Mirrae Asset ELLS Tax Saver Fund- Invested lump sum Rs. 75,000/- in Feb & March 2021 4. Parag Parekh ELSS: - Currently invested Rs. 1,05,000/- 5. Canara Rebeco Bluechip Equity Fund- Currently invested Rs. 87,000/- (due lack of knowledge and chasing top performer, I have ended up in investing various ELSS fund) MFs where SIPs are continued 1. Quant ELSS- Rs. 5,000/- PM 2. Parag Parikh Flexi Cap- Rs. 3,000/- PM (chose this fund as better alternative of Large cap fund) 3. Quant Small Cap- Rs. 3,000/- PM- (started SIP for exposure to Small Cap) 4. Kotak Emerging Equity- Rs. 3,000/- PM (started SIP for exposure to Mid Cap) 5. Tata Nifty Midcap 150 Momentum 50 – Rs. 3,000/- PM (started SIP for exposure to Mid Cap) As on date, portfolio distribution as Debt- 5.17 % Other- 3.80% Equity- 90.98 % (of total equity 69.80 % in L-Cap, 16.53 in M-Cap and 13.66 in S-Cap) I would appreciate your detailed review of my portfolio and financial condition. Specifically, I am looking for insights into the following areas: • Should I redeem my funds in which SIPs are discontinued which would attract LTCG or should I just continue to hold them? • I have now started to rebalance my portfolio and aim to have distribution of my equity as 50-55% in Large CAP, 35-30% in Mid Cap and 15-20% in Small Cap. Is this a good approach to achieve good return? • I haven’t invested in any debt fund because I have RDs of 8 lakh, which I think, act like both fixed income asset and emergency fund. Is my understanding correct? Or should I invest in some debt fund (pure debt fund or hybrid fund)? • Should I take exposure to international funds and gold funds? • Any recommendations for optimizing my mutual fund portfolio for better performance. Thanks.

Ans: You have done well in diversifying your investments. Your portfolio has a good balance between equity, fixed income (recurring deposits), and NPS contributions. Let's discuss specific aspects of your situation to further optimize your portfolio.

Mutual Fund Portfolio Review
Discontinued SIPs: ELSS Funds

You have several discontinued SIPs in ELSS funds. ELSS funds offer tax benefits but come with a three-year lock-in period. Since these funds are no longer in your active SIP portfolio, consider the following:
Tax Impact: Redeeming these funds will attract long-term capital gains (LTCG) tax. For gains above Rs 1.25 lakh, LTCG is taxed at 12.5%. You should evaluate the taxable impact before redeeming. If the LTCG is substantial, staggering withdrawals across financial years could help minimize tax liabilities.
Performance Monitoring: Review the performance of these funds. If they’re underperforming compared to other ELSS or diversified funds, it might be better to exit. On the other hand, if these funds are delivering good returns, you could hold them for more growth.
Redemption Timing: Since these are tax-saving funds, check the lock-in period status. If the lock-in period is over and the fund’s performance isn’t aligned with your goals, you can consider redeeming them.
Active SIPs: Small, Mid, and Flexi Cap Funds

You have active SIPs in small-cap, mid-cap, and flexi-cap funds. Your strategy to diversify across different market caps is sound, but it's important to monitor:
Market Volatility: Small and mid-cap funds tend to be more volatile. While they can offer higher returns, they are also riskier. Having a balanced exposure across large, mid, and small caps helps manage risks.
Fund Performance: Keep an eye on the performance of your small and mid-cap funds. Ensure that they are consistently performing well against their respective benchmarks.
Review Flexi-Cap Allocation: Flexi-cap funds provide the flexibility to invest across market caps. It’s good that you have exposure to a flexi-cap fund as it adds diversification. Make sure your flexi-cap fund has a strong track record of managing market volatility.
Portfolio Rebalancing: Target Allocation Review
You aim to have a portfolio distribution of 50-55% in large-cap, 30-35% in mid-cap, and 15-20% in small-cap. This is a prudent strategy, especially for wealth accumulation over the long term. Here’s an assessment:
Large-Cap Focus: Large-cap stocks provide stability and lower risk. Targeting 50-55% in large-cap will help cushion the volatility from mid and small-cap investments.
Mid and Small-Cap Allocation: Your exposure to mid and small caps is within a reasonable range. Mid-cap funds can offer a balance of growth and risk, while small-cap funds, though riskier, have the potential for higher returns in the long run.
Ongoing Rebalancing: It’s important to rebalance your portfolio periodically to maintain this allocation, especially during market movements. You can do this by adjusting your SIP amounts or making lump-sum investments in under-allocated segments.
Debt Investment: Role of Recurring Deposits
You have Rs 8 lakhs in recurring deposits (RDs), which act as your fixed-income investment. While RDs are safe, they may not offer the best returns over time. Here’s a detailed view:
Fixed-Income Component: RDs are a good tool for regular savings but may not keep up with inflation. They are better suited for short-term goals or an emergency fund. The return on RDs is usually lower compared to debt mutual funds.
Debt Fund vs RD: A well-diversified portfolio should have some allocation to debt mutual funds, as they tend to offer better post-tax returns than RDs, especially in higher tax brackets. You can consider allocating a portion of your RDs into debt funds, which provide liquidity, tax efficiency, and better returns over the long term.
Hybrid Funds: You could also consider hybrid funds if you want a mix of equity and debt exposure. These funds offer a balance between growth (through equity) and stability (through debt).
International and Gold Fund Exposure
International Funds: Diversifying into international markets can be beneficial, especially for long-term investors. International funds give you exposure to global companies that may not be available in the Indian market. Moreover, they act as a hedge against rupee depreciation. Allocating 5-10% of your portfolio to international funds can enhance diversification.

Currency Risk: Keep in mind that international funds are exposed to currency fluctuations. However, over a long investment horizon, the benefits usually outweigh the risks.
Fund Selection: If you decide to invest in international funds, focus on regions or countries that have strong growth potential or sectors like technology, which are underrepresented in Indian markets.
Gold Funds: Gold is traditionally seen as a safe haven during economic uncertainties. It can serve as a hedge against inflation and market volatility.

Gold Allocation: You could allocate around 5-10% of your portfolio to gold. However, avoid over-exposure, as gold doesn’t generate income and its returns are typically lower over the long term compared to equities.
Investment Routes: Instead of gold mutual funds, you might also consider Sovereign Gold Bonds (SGBs) which offer the benefit of interest payments and tax-free capital gains if held till maturity.
NPS Contribution and Pension Management
You are contributing Rs 22,000 per month to NPS, with a current corpus of Rs 21 lakhs. Your asset allocation within NPS is spread across equity, corporate debt, and government securities.
Equity Allocation: At 49.64%, your equity exposure within NPS is well-placed for growth. As a long-term investor, equity will help build your corpus.
Debt Allocation: The combined 50.36% allocation in corporate debt and government securities provides stability and reduces risk. This balanced allocation ensures that your retirement savings are protected from market volatility.
HDFC Pension Management: Keep reviewing the performance of your pension fund manager. NPS allows you to switch fund managers once a year if needed, so ensure that your chosen manager is delivering competitive returns compared to peers.
Insurance Coverage: Term Plan
Your current term insurance of Rs 1 crore is good, but you’re planning to increase it to Rs 2 crore. This is a wise move as it will better protect your family’s financial future.
Life Cover Adequacy: As a rule of thumb, your term insurance cover should be at least 10-12 times your annual income. Given your monthly income of Rs 95,000, a Rs 2 crore cover will provide ample security for your family in case of an untimely event.
Health Insurance: Since you’re covered under the Central Government Health Scheme (CGHS), which is a reimbursement type facility, it provides a reliable safety net for medical expenses.
Recommendations for Portfolio Optimization
Simplify ELSS Exposure: You have invested in multiple ELSS funds. To optimize your portfolio, consider consolidating your ELSS investments into one or two high-performing funds. This will make your portfolio easier to manage and track.

Continue with Mid and Small Cap Allocation: Your current allocation to mid-cap and small-cap funds seems balanced. Ensure that these funds are delivering competitive returns compared to their benchmarks.

Debt Fund Introduction: Consider introducing a debt mutual fund for better tax efficiency and returns compared to recurring deposits. You can start with a conservative or dynamic bond fund, depending on your risk appetite.

Monitor Regularly: Keep reviewing your mutual funds’ performance. Look at how they perform against their benchmarks and peer funds. If a fund consistently underperforms, consider switching.

Diversify Globally: Allocating 5-10% of your portfolio to international funds will add global diversification and reduce geographical risk. Stick to markets or sectors with strong growth potential.

Gold as a Hedge: Add 5-10% of gold exposure for portfolio stability. Sovereign Gold Bonds (SGBs) are a tax-efficient and reliable option.

Final Insights
Your overall financial situation is sound with a good mix of equity, fixed-income, and real estate investments.

Consider consolidating your ELSS portfolio and introducing debt funds for better returns and risk management.

Adding international funds and a small allocation to gold will enhance diversification and protect against currency fluctuations and inflation.

Continue monitoring and rebalancing your portfolio periodically to ensure you stay on track with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment