Sir i am 50 yrs old has rental income from two houses in mumbai is 70,000.00 (Worth 2.5cr).Son has completed engineering. Stocks worth 2.5cr, daughter in 9th std, fd worth 50lac. No debt and no loan in the house in which i live(worth 1.2cr).can i retire, need olan for monthly total 2.0lac expense.n
Ans: You are 50 years old with a solid financial base. You have two rental properties in Mumbai generating Rs. 70,000 per month. Your son has completed engineering, and your daughter is in 9th standard. You own stocks worth Rs. 2.5 crores, fixed deposits (FDs) worth Rs. 50 lakhs, and a house worth Rs. 1.2 crores with no debt. You want to retire and cover monthly expenses of Rs. 2 lakhs. Let’s evaluate your financial situation and structure a plan for a comfortable retirement.
Current Income and Assets
Rental Income: Rs. 70,000 per month
Stock Portfolio: Rs. 2.5 crores
Fixed Deposits: Rs. 50 lakhs
Primary Residence: Rs. 1.2 crores (No loan or debt)
Total Worth of Rental Properties: Rs. 2.5 crores
You have a substantial financial foundation that can support your retirement plan with careful management.
Monthly Expense Planning
Current Monthly Expenses: Rs. 2 lakhs
Income from Rentals: Rs. 70,000 per month
There is a gap of Rs. 1.3 lakhs per month between your income and expenses. This gap needs to be covered by drawing from your investments.
Income Generation Strategy
To meet your monthly expenses, you’ll need to create a stable and reliable income stream from your assets. Here’s how you can do it:
1. Systematic Withdrawal Plan (SWP) from Mutual Funds
Generate Regular Income:
Convert a portion of your stock portfolio into a diversified mutual fund portfolio.
Set up a Systematic Withdrawal Plan (SWP) from these funds to generate a consistent monthly income.
SWPs can provide you with a steady flow of income while keeping your capital invested for growth.
Withdrawal Amount:
Start by withdrawing Rs. 1.3 lakhs per month, adjusted for inflation over time.
Equity-Debt Balance:
Maintain a balance between equity and debt in your mutual fund portfolio.
Equity can provide growth, while debt can offer stability and reduce risk.
2. Interest from Fixed Deposits
Interest Income:
Your Rs. 50 lakhs in FDs can generate interest income.
Depending on the interest rate, this could add a supplementary income stream.
Laddering Strategy:
Consider using an FD laddering strategy, where you split your FDs into multiple maturities.
This can provide liquidity at regular intervals, ensuring you have access to funds when needed.
3. Dividend Income from Stocks
Dividend Yield:
Some of the stocks in your portfolio might provide dividends.
Reinvest dividends or use them as additional income to reduce the amount needed from your SWP.
Review and Rebalance:
Periodically review your stock portfolio to ensure it aligns with your risk tolerance.
Shift some funds to dividend-paying stocks if necessary.
Planning for Inflation
Inflation Adjustment:
Your monthly expenses will likely increase due to inflation.
Ensure your income sources, especially SWP and dividend income, grow at a rate that matches or exceeds inflation.
Periodically adjust the withdrawal amount in your SWP to match inflationary pressures.
Managing Healthcare Expenses
Health Insurance:
Ensure your health insurance coverage is adequate for your needs.
You should have a comprehensive health insurance plan covering both you and your spouse.
Medical Corpus:
Set aside a portion of your fixed deposits as a dedicated medical corpus.
This will provide a safety net in case of unexpected medical expenses.
Education Fund for Your Daughter
Setting Aside Funds:
Allocate a portion of your assets towards your daughter’s higher education expenses.
This can be done through a dedicated mutual fund portfolio or a combination of FDs and mutual funds.
Goal-Based Investments:
Consider investing in balanced or conservative mutual funds to grow this corpus with lower risk.
Plan the withdrawal to coincide with her higher education needs in the coming years.
Reviewing and Rebalancing the Portfolio
Regular Monitoring:
Regularly review your investment portfolio to ensure it is aligned with your goals.
Rebalance the portfolio annually or bi-annually to maintain the desired asset allocation between equity, debt, and other instruments.
Risk Management:
As you approach deeper into retirement, gradually reduce exposure to high-risk assets.
Focus on capital preservation while ensuring sufficient growth to cover inflation.
Legacy Planning
Estate Planning:
Consider creating a will to ensure your assets are distributed according to your wishes.
Include provisions for your children’s future needs, ensuring that their financial security is maintained.
Nomination and Trusts:
Ensure that all your investments, insurance policies, and assets have proper nominations.
Consider setting up a trust if you wish to provide long-term financial security for your family.
Final Insights
With your current assets and income, retiring at 50 is achievable. By carefully structuring your investments and setting up a reliable income stream, you can comfortably cover your monthly expenses while maintaining and growing your wealth. Regularly review and adjust your financial plan to stay on track and adapt to changing circumstances.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in