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40-Year-Old Salaried Employee Seeking Financial Advice: Is My Portfolio Enough?

Ramalingam Kalirajan |7466 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jan 07, 2025

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

Question by Teme on Jan 07, 2025Hindi

Dear Ramalingam, I’m a salaried employee aged 40. My take home salary is currently pegged at 1.05L/month, after deductions, tax, savings. My monthly savings/contributions include Superannuation fund around 11.5K, Provident Fund around 13.8K and additional Voluntary PF contributions currently averaging 46K. I’ve opted for NPS individually since 2019 and around 60K inflow is available there annually. I’ve an insurance policy for 5L (Jeevan Anand for 25Y period and currently in the 7th yr) and haven’t opted for Term insurance/personal health insurance currently, except the corporate health insurance coverage. My EPFO balance currently is around 48L and I’ve Postal savings in RD/NSC/PPF/SSA instruments [altogether currently valued around 12L+ (PPF/SSA is hardly aged 3 yrs and contributions are yearly 1.5L respectively)]. I’ve not availed loans and do not use a Credit Card. I’ve not ventured into Equities, as I’m risk averse person. I’m the prime bread winner for family consisting of my spouse(not working), 2 kids(aged 4(M) and 1(F)) and my parents (not working/not having any income and are senior citizens, aged 80+ and 70+). We’ve a house and agricultural land around 60 cents(non-metro, village). My monthly expense can be pegged currently at 30-40K range, including rentals. I’d like to have a review and expert opinion/evaluation on my portfolio, whether its satisfactory. (I understand the definition of satisfactory is subjective in nature). Assuming if I’m healthy and continuing to work until 50-55Yrs range, provide an analysis, whether the current patterns will suffice for sustaining the inflation and/or future expenses. Awaiting your valuable inputs. Regards,

Ans: Your financial discipline is commendable. Below is a detailed analysis of your current portfolio, along with recommendations for improvement.

Income and Savings Overview
Your take-home salary of Rs. 1.05 lakh/month allows for significant savings potential.

Superannuation, PF, and VPF contributions total nearly Rs. 71,300 monthly.

Annual NPS contributions of Rs. 60,000 provide additional retirement savings.

Insurance Coverage
The Jeevan Anand policy offers Rs. 5 lakh coverage, which is insufficient for your family.

You lack term insurance, which is crucial as the primary breadwinner.

Relying solely on corporate health insurance is risky for your family’s medical needs.

Current Investments
EPFO balance of Rs. 48 lakh is a strong retirement foundation.

Postal savings (RD/NSC/PPF/SSA) total Rs. 12 lakh, but they lack growth potential.

Contributions to PPF and SSA are beneficial but need complementary growth instruments.

No exposure to equities limits the wealth-building capacity of your portfolio.

Expense Management
Monthly expenses of Rs. 30,000-40,000 are well within your income limits.

Future expenses for children’s education and parental care must be considered.

Analysis of Future Financial Sufficiency
Retirement Goal

If you work until 55, your current savings pattern may need augmentation.
Inflation and rising medical costs will require a larger retirement corpus.
Children’s Education and Marriage

Expenses for higher education and weddings will significantly impact your corpus.
Parental Care

Senior citizen healthcare costs can be unpredictable and expensive.
Recommendations for Improvement
Increase Insurance Coverage
Opt for a term insurance policy of at least Rs. 1 crore.

Secure a family health insurance plan with adequate coverage.

Diversify Investments
Add equity exposure through actively managed mutual funds.

Allocate around 25% of savings to equity mutual funds for higher growth.

Continue PPF and SSA contributions, but limit postal savings to maintain liquidity.

Optimise Retirement Savings
Review NPS allocation to ensure a balanced equity and debt mix.

Increase contributions to NPS for tax benefits and long-term growth.

Reduce over-reliance on VPF and add growth instruments like mutual funds.

Plan for Long-Term Goals
Estimate future costs for children’s education and create a targeted investment plan.

Use a combination of equity and debt funds to balance risk and returns.

Emergency Fund Creation
Maintain 6-12 months’ expenses in a liquid fund or savings account.

This will provide financial security during unforeseen circumstances.

Tax Efficiency
Review your investments annually to optimise tax savings.

Use Section 80C, 80D, and NPS tax benefits effectively.

Final Insights
Your financial discipline and savings pattern are excellent. However, diversification and better planning are essential.

Focus on increasing insurance coverage, adding growth instruments, and planning for future milestones.

With these adjustments, you can comfortably achieve your goals and sustain your lifestyle.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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