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How can I retire with a Rs.1 lakh monthly pension at 50?

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 29, 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
Dr Question by Dr on Jul 28, 2024Hindi
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Respected Sir, I am 40 years female with husband and 8years old daughter. My monthly salary is around 60k with 5%yearly increment.current investment portfolio is around 14 lacs in stock market. 1lac in SGB.ppf balance is around 10.38 lacs. I have one SSA account balance 13.6 lacs. I have endowment plans of current surrender value of around 4 lacs. I can invest 40 k currently through sip. Is it possible for me to retire at the age of 50 with a pension of 1lc/month.

Ans: Current Financial Overview
Monthly Salary: Rs. 60,000 with a 5% yearly increment.

Stock Market Investment: Rs. 14 lakhs.

Sovereign Gold Bonds (SGB): Rs. 1 lakh.

Public Provident Fund (PPF): Rs. 10.38 lakhs.

Sukanya Samriddhi Account (SSA): Rs. 13.6 lakhs.

Endowment Plans: Current surrender value of Rs. 4 lakhs.

SIP Investment Capacity: Rs. 40,000 per month.

Retirement Planning Goal
Desired Retirement Age: 50 years.

Target Monthly Pension: Rs. 1 lakh.

Income Generation and Increment Assessment
Your salary increases by 5% yearly. This steady growth will boost your savings and investment capacity over time. Consistent investment in SIPs will compound your wealth, aiding in reaching your retirement goal.

Stock Market Investments
Your stock market investment of Rs. 14 lakhs is a good start.

Regularly review and rebalance your portfolio with a Certified Financial Planner's guidance.

Diversify to mitigate risks and maximize returns.

Sovereign Gold Bonds (SGB)
SGBs are secure investments with a fixed interest rate and capital appreciation.

Hold onto your SGBs as a hedge against inflation and economic uncertainties.

Public Provident Fund (PPF)
Your PPF balance of Rs. 10.38 lakhs will grow with the current interest rates.

Continue contributing to PPF to benefit from tax-free returns and compounding interest.

Sukanya Samriddhi Account (SSA)
SSA balance of Rs. 13.6 lakhs will support your daughter's future needs.

Continue contributing to SSA for higher returns and tax benefits.

Endowment Plans
Evaluate the performance of your endowment plans.

Consider surrendering if returns are low and reinvesting in mutual funds for better growth.

Monthly SIP Investment
Investing Rs. 40,000 monthly in SIPs is a sound strategy.

Choose a mix of equity and debt funds based on your risk tolerance and goals.

Regularly monitor and adjust your SIP portfolio with professional advice.

Long-Term Investment Strategy
Focus on mutual funds managed by experienced fund managers for active management benefits.

Regularly assess your portfolio's performance and reallocate if needed.

Retirement Corpus Calculation
Given your savings, investments, and potential returns, build a robust retirement corpus.

Aim to accumulate a corpus that can generate a Rs. 1 lakh monthly pension through systematic withdrawals.

Insurance and Risk Management
Ensure adequate life and health insurance for your family.

Review and update your policies to cover future medical and financial risks.

Final Insights
Your current financial discipline and investment strategy are commendable.

Consistently invest, review, and adjust your portfolio to stay on track for retirement.

Seek guidance from a Certified Financial Planner for personalized advice and optimal financial planning.

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

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

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Hello Sir. I am 42 years old.my monthly earning rs.95000.I am investing 40,000 per month from July,24 in mutual funds and 5L in lumsump MF in ICICI prudential energy opportunities fund.rs.24000 in RD in bank.Currently corpus is 25L in ppf, 25L in PF,20L in FD ,45L in LIc.i have one son age 8 yrs.i have own car, bike. I have parental house.If I have to retire at the age of 60 and require monthly 5 lakhs, is it possible, and if yes, what should be my strategy?
Ans: Current Financial Situation
You have a stable monthly income of Rs. 95,000.

You invest Rs. 40,000 per month in mutual funds since July 2024.

You have invested Rs. 5 lakhs in a lump sum mutual fund.

You save Rs. 24,000 monthly in a recurring deposit.

Your corpus includes:

Rs. 25 lakhs in PPF
Rs. 25 lakhs in PF
Rs. 20 lakhs in FD
Rs. 45 lakhs in LIC
You have an 8-year-old son.

You own a car, a bike, and have a parental house.

Goal: Retirement at 60
You wish to retire at 60 and need Rs. 5 lakhs monthly post-retirement.

Analysis of Current Investments
Your current investments are diversified:

Mutual funds for growth
PPF and PF for safety
FD for liquidity
LIC for insurance and savings
This is a balanced approach. However, to meet your goal, adjustments are needed.

Mutual Funds
Continue with mutual funds for growth. They provide higher returns over time. Consider diversifying into large-cap, mid-cap, and balanced funds. This reduces risk and ensures steady growth.

Recurring Deposit
Recurring deposits offer fixed returns. However, they are less effective for long-term growth. You might consider redirecting some RD funds into equity mutual funds. This can potentially provide better returns.

PPF and PF
These are excellent for long-term safety. They provide tax benefits and guaranteed returns. Continue these for stability and safety in your portfolio.

Fixed Deposits
FDs provide liquidity but offer lower returns. Consider reallocating some funds into more growth-oriented investments. This can help in building a larger retirement corpus.

LIC Policies
LIC policies often offer lower returns compared to mutual funds. Consider reviewing your policies. If they are investment-cum-insurance, think about surrendering and investing in mutual funds. Use a term insurance plan for pure risk cover.

Lump Sum Investment
Your lump sum investment in a sector-specific fund is high risk. Consider diversifying into diversified equity funds. This reduces risk and ensures better long-term growth.

Strategy for Achieving Retirement Goal
Increase SIP Contributions
Increase your monthly SIP contributions. Aim for at least 50% of your monthly income. This ensures a larger corpus over time.

Diversify Investments
Diversify across various mutual funds. Include large-cap, mid-cap, and balanced funds. This spreads risk and maximizes returns.

Regular Review and Rebalancing
Review your portfolio every six months. Rebalance to maintain the desired asset allocation. This helps in staying aligned with your goals.

Emergency Fund
Maintain an emergency fund of at least 6 months of expenses. Park this in liquid funds for easy access. This ensures financial stability during emergencies.

Retirement Planning
Start planning for retirement expenses. Consider inflation and rising costs. Use retirement calculators to estimate the required corpus. Adjust your investments accordingly.

Professional Guidance
Seek advice from a Certified Financial Planner. They can provide tailored strategies. A CFP ensures your investments are aligned with your retirement goals.

Final Insights
Your current investments are on the right track.

Increase your SIP contributions for better growth.

Diversify your mutual fund investments.

Review and rebalance your portfolio regularly.

Seek professional guidance for a tailored approach.

With disciplined investing, achieving your retirement goal is possible.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

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

Asked by Anonymous - Nov 05, 2024Hindi
Money
I am 40 years old . My in hand salary is 3.5 LPM. I have equity portfolio of 19L ( invested 12L) and MF portfolio of 78 L ( 38L US MF Lumpsum since 2021 rest in Indian MF). I have MF SIP of 1.5LPM, RD 25K PM, NPS(2L) 7000/Month, PPF ( 5.5 L) 5000/month. My monthly expenses are 80000/mo and EMI 1L / month for next 20 years. Have 1 property. Have a 7 yr old kid. Need to plan for retirement and education of kid . Can I plan retirement by 50 years.
Ans: At 40, with an impressive monthly income and investment discipline, you’re in a strong position for financial goals like early retirement and your child’s education. Let’s explore a structured approach to ensure financial security, income stability, and wealth growth.

Assessing Current Financial Standing
1. Income and Expenses
Your monthly income is Rs 3.5 lakh, which is substantial.

Monthly expenses stand at Rs 80,000, and EMI payments are Rs 1 lakh. This totals Rs 1.8 lakh in committed monthly outflows.

2. Investment Portfolio
Equity Portfolio: Rs 19 lakh (invested Rs 12 lakh).

Mutual Fund Portfolio: Rs 78 lakh (including Rs 38 lakh in US funds).

SIP Contributions: Rs 1.5 lakh per month in mutual funds, which reflects your solid commitment to wealth creation.

PPF: Rs 5.5 lakh balance with Rs 5,000 monthly contributions.

Recurring Deposit: Rs 25,000 per month.

NPS: Rs 2 lakh balance with Rs 7,000 monthly contributions.

Evaluating Debt Position and EMI
Your EMI commitment of Rs 1 lakh for the next 20 years significantly impacts cash flow, which is crucial for your retirement planning.

Aim to make occasional pre-payments if possible to reduce tenure.

If there’s an opportunity, consider renegotiating your loan for a better interest rate.

Goal-Based Financial Planning
1. Child’s Education
A 7-year-old child’s higher education costs can be high in 10-12 years due to inflation.

Consider a dedicated portfolio for your child’s education using equity and debt mutual funds. With 10-12 years of horizon, equities could be beneficial.

Ensure regular SIPs and review annually to align with the goal.

Avoid using PPF for this purpose, as it’s better suited for retirement due to its lock-in nature.

2. Retirement at 50
With a current lifestyle, expenses post-retirement may increase, especially for healthcare and lifestyle.

Early retirement at 50 may require a significant corpus due to the long post-retirement period.

Factor in inflation, aiming to have at least Rs 3 crore in today’s terms, growing with inflation.

Your MF SIPs and equity portfolio are commendable but may need to be further scaled up for a secure retirement corpus.

Enhancing Your Portfolio for Retirement and Education Goals
1. Mutual Funds - Focus on Active Management
Actively managed mutual funds allow expert fund managers to adjust strategies based on market conditions.

Avoid index funds as they lack flexibility, limiting returns in changing market conditions.

Regular funds through Certified Financial Planners (CFP) can provide insights and consistent updates, which are beneficial over direct investments for reliable growth.

2. RD and PPF Contributions
Consider gradually shifting recurring deposits (RD) to more growth-oriented investments. RD rates are relatively low compared to inflation.

PPF is a safe retirement component but lacks growth to match inflation effectively.

Aim to increase equity exposure gradually, especially as you near retirement, to maintain inflation-beating returns.

3. NPS - A Reliable Retirement Component
NPS offers tax-saving benefits and additional growth due to partial equity exposure.

Continue NPS contributions to further grow your retirement fund, but remember it has limited liquidity.

As retirement nears, you may consider moving a portion into low-risk or balanced funds to secure returns.

Tax Planning and Exit Strategy
1. Capital Gains on Equity Investments
Under the new tax laws, long-term capital gains (LTCG) on equity above Rs 1.25 lakh are taxed at 12.5%.

Short-term gains (STCG) are taxed at 20%. Strategic fund withdrawals could reduce the tax burden.

Rebalance your portfolio periodically to avoid tax inefficiencies and realise gains efficiently.

2. Insurance (ULIP)
ULIP policies are often suboptimal for investments, given their high charges and lower returns.

Consider surrendering the ULIP and reinvesting in mutual funds with a systematic approach to boost returns.

Preparing for Medical and Life Insurance Needs
Secure adequate health insurance for yourself and your family. Early retirement could mean higher healthcare costs.

Life insurance is crucial to protect family goals, especially for your child’s education.

Avoid investment-based insurance; term insurance offers better protection at a low cost.

Reviewing Your EMI Strategy
With a 20-year EMI commitment, debt repayment is a priority, especially with the goal of retiring early.

If cash flow permits, consider making partial pre-payments on the loan periodically.

This strategy can reduce loan tenure, lower interest outflow, and increase disposable income in retirement.

Building an Emergency Fund
An emergency fund covering 6-12 months of expenses is essential.

Keep this in a combination of liquid funds and savings accounts for easy access.

This fund ensures you won’t need to dip into retirement savings for unexpected expenses.

Finally
Early retirement requires careful planning, balancing investment growth, debt repayment, and goal-specific strategies. Staying disciplined with SIPs, reviewing investments, and making adjustments will support your goals. A Certified Financial Planner can help monitor these plans and suggest optimal rebalancing over time to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

..Read more

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Ravi

Ravi Mittal  |431 Answers  |Ask -

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Asked by Anonymous - Nov 22, 2024Hindi
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A bit long story I'm 21 student preparing for medical competative entrance exam for past 3 years (21-24).2 year ago this phase I was in a long distance relationship for 4 months with a girl I met in my class .But it didn't last long due to the problems created due to distance as she couldn't understand myself and I couldn't understand herself.so there was a misunderstanding and I couldn't hold on as I was in heavy pressure by exams and financial problems.so I couldn't handle and I felt like too early and broke up with her by losing my mind.she was completely disappointed as I didn't speak to her for more than an year due to one more year preparation.i missed her very much but I didnt tell her.I missed govt seat in border mark and the same year she got into a relationship with another guy in her class.i don't blame her. But I feel like my entire life is shattered and I couldn't move on from that girl till now.I couldn't concentrate on my career too.im kind of person who is always confident in all aspects but I have totally lost my mind .I can see that in an danger situation as age is running and family pressure, everyone of my classmates are far ahead of me I couldn't withstand this situation and couldn't make proper decision in any aspect. Mam please help me out.
Ans: Dear Anonymous,
I understand your concerns. The first step is to focus on moving on; she has, and you should too. Prioritize your career, your family, and your future. Next, what has happened to your career progress has already happened. It's unfortunate, but there's no way to change that. But give yourself a second chance; work harder and achieve greater things than you even imagined before. Trust me, you are not the only person who is standing in a situation like this. Many have, and many more will. But the ones who have passed this time will give you the same advice that I did.

Best Wishes.

...Read more

Milind

Milind Vadjikar  |683 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 22, 2024

Asked by Anonymous - Nov 13, 2024Hindi
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Sir, I am 40yrs old. Having monthly takehome salary of 1.1 lakh and rental income of 36000. My investment are 2 flats worth of 1cr. 4 plots in Bhubaneswar worth of 2crs. EPF balance 50 lakh, LIC policies worth of 16 lakhs, NPS worth of 10 lakhs. My monthly saving commitments are - EPF (employee+employer) 28000 NPS 15000 MF 7500 Gold scheme 5000 Financial burden - HL emi of 24000 Monthly expanses 50000 I would like to retire at 50. Please advise for retirement plan with life expectancy of 80yrs.
Ans: Hello;

The value of your investments after 10 years;

A. EPF Corpus+Contribution: 1.6 Cr
B. NPS Corpus+Contribution: 53 L
C. MF(sip) + Gold(sip): 25 L
D. Real estate (land): 3.26 Cr

So sum of A, C & D gives us a corpus of 5.11 Cr

Since you will withdraw NPS before 60 age 80% of corpus will go into annuity while 20% will be available to you.

So you may expect monthly income of around 21 K from annuity(42.4 L).

Balance 10.6 L get added to 5.11L taking your total corpus to ~ 5.2 Cr.

If you invest 5 Cr in a conservative hybrid debt fund and do a SWP at the rate of 3%, you may expect a monthly income of around 1.1 L(post-tax).

Add your monthly rental income of 36 K(No growth factored) and annuity income of 21 K to this and you have total monthly income of 1.67 L after 10 years.

Your current monthly expenses of 50 K after 10 years would be around 90 K and 1.6 L after 20 years.

Considering return of around 7-7.5% from the conservative hybrid debt fund you will still generate inflation adjusted return at 3% SWP after 80 years of age.

Assumptions:
Inflation rate-6%
Return from EPF-8%
Return from NPS-9%
Return from MF-10%
Return from gold-7%
Return from Land-5%
Annuity rate-6%

The spare flat is not considered in this because it will continue to yield you rental income in retirement.

Since real estate(land) returns may fluctuate over 10 years suggest to increase MF sip(6X) as a back-up, also in this case you may decide to retain & invest in NPS upto 60 age.

Of course MF returns are also not assured but you are improving the odds by backing two appreciable assets(RE & equity) over long-term.

Happy Investing;
X: @mars_invest

...Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

...Read more

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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