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Retired Consultant With 1.8 Cr Corpus & 20 Lakh Income Wants to Wind Up, Teach & Travel - How to Invest?

Milind

Milind Vadjikar  |1153 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Oct 04, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Ashok Question by Ashok on Oct 03, 2024Hindi
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I retired from service & took consultancy as freelance and having a corpus of PPF 75 lacs, NPS 24 lacs, scss6. 5 lacs others 20 Mutual fund corpus 1.8 cr Equity 1.5 Cr Pension per month 9000 Income 20 lacs Rental income 1.2 lacs per annum. My question as I want to windup the consultancy in 2025 and devote time in teaching & traveling to explore new place. Health cover is there of 20 lacs Requirement per month is 1.5 lacs Kindly guide how to park the amount to get this with 10 percent increase in every year in expenses. Ashok

Ans: You may buy immediate annuity for your corpus of 4.55 Cr.

Considering annuity rate of 5% you may expect to receive monthly payout of 1.33 L(post tax).

Add you pension and rental income to this, so 133 K+9 K+ 10 K=152K.

Many insurance providers offer feature of increasing annuity per year.

You may opt for it for hiking the monthly payout each year.
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  |8192 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 27, 2024

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Hi, my age is 40, I want to retire by 50 with Rs. 2 Crore of Corpus, Right Now i have Rs. 17 lacs in PF, Rs. 5 Lacs in NPS, Rs.1 Lacs in PPF and Home loan Completed this year. I have one LIC policy of Premium of Rs. 24000 Yearly. Now I don’t have single saving in my saving account. my monthly expense is 35k. I want to start from Zero. My monthly on hand salary is Rs. 1.5 Lacs and i am ready to take risk for Higher return. I have Jeevan Saral Policy starting from 2010 to still now and its mature on September-2023, I have checked and surrender the value comes to Rs. 6 Lacs, overall, i check and confirm only 5 to 6% comes in LIC Policy. Please advise only 5 years remaining for maturity. Also, in My monthly income i can easily save Rs. 1.05 Lacs if consider Rs. 45k Monthly expense. Issue is I am from Market since long 15 years and Right Now Market is very high so it’s advisable to start a SIP. or invest on safe place like FD & RD. Can I increase NPS contribution Rs 50 k to Rs. 1.50 lacs or invest in PPF account of Rs. 1.5 Lacs annually and also open a PPF account for daughter.
Ans: Building a Robust Retirement Plan: A Strategic Approach
Congratulations on completing your home loan! With no debts and a strong monthly income, you are in a great position to plan for retirement. Here’s a comprehensive strategy to achieve your goal of a Rs. 2 crore corpus by the age of 50.

Assessing Your Current Financial Health
Here’s a summary of your current financial standing:

Provident Fund (PF): Rs. 17 lakh
National Pension System (NPS): Rs. 5 lakh
Public Provident Fund (PPF): Rs. 1 lakh
LIC Policy: Surrender value Rs. 6 lakh
You have a solid foundation but need to optimize your investments to reach your goal.

Evaluating Your Current Investments
You have Rs. 6 lakh in an LIC policy with a return of 5-6%. Considering its low return, it might be wise to redirect this amount into higher-yielding investments. Surrendering it and reinvesting in better options could be beneficial.

Creating a Diversified Investment Strategy
Given your readiness to take risks for higher returns, a diversified approach is ideal. Here's how you can structure your investments:

Increasing Contributions to NPS and PPF
NPS: Increasing your contribution to Rs. 1.5 lakh annually can provide additional tax benefits and long-term growth. NPS is a good mix of equity and debt.
PPF: Maximizing your PPF contribution to Rs. 1.5 lakh annually ensures risk-free returns with tax benefits. Opening a PPF account for your daughter is also a good long-term strategy.
Investing in Mutual Funds
Starting a Systematic Investment Plan (SIP) in mutual funds is advisable despite current market levels. SIPs average out the cost over time, reducing market volatility risk. Actively managed funds can offer better returns than index funds due to professional management and strategic asset allocation.

Liquid Savings and Emergency Fund
Maintaining liquidity is crucial. Since you can save Rs. 1.05 lakh monthly, allocate a portion to build an emergency fund. Aim for 6-12 months' worth of expenses, i.e., Rs. 2.7 lakh to Rs. 5.4 lakh. This fund should be easily accessible, such as in a high-interest savings account or liquid mutual funds.

Tax Planning and Optimization
Maximize tax-saving investments to enhance returns. Utilize Section 80C benefits with investments in PPF, NPS, and ELSS funds. Consider tax-efficient investment options that offer higher post-tax returns.

Reviewing Insurance Coverage
You have term insurance for family protection, which is excellent. Ensure the coverage amount is adequate considering inflation and future needs. Health insurance provided by your company is beneficial, but consider a separate policy for comprehensive coverage during job transitions or retirement.

Rebalancing Your Portfolio
Regularly review and rebalance your portfolio to align with your risk tolerance and financial goals. As you approach retirement, gradually shift from high-risk equity investments to safer debt instruments to protect your corpus.

Financial Discipline and Monitoring
Maintain financial discipline by sticking to your savings plan. Regularly monitor your investments and adjust strategies as needed based on market conditions and life changes.

Retirement Corpus Calculation
Estimate the corpus required for a comfortable retirement by considering inflation, life expectancy, and desired lifestyle. Use retirement planning tools or consult a Certified Financial Planner for precise calculations.

Systematic Withdrawal Plan (SWP)
Upon retirement, implement a Systematic Withdrawal Plan (SWP) from your mutual fund investments. SWPs provide a steady income stream and tax efficiency, ensuring your corpus lasts longer.

Continuous Learning and Adaptation
Stay informed about financial markets and investment opportunities. Financial planning is dynamic; adapt your strategy based on changing economic conditions and personal circumstances.

Conclusion
Your financial health is solid with no debts and a high savings potential. By following a diversified investment strategy and maintaining financial discipline, you can achieve your goal of retiring with a Rs. 2 crore corpus by 50. Optimize tax savings, regularly review your portfolio, and adjust as necessary to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8192 Answers  |Ask -

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

Money
I am 46 and Plan to work for next 5 years with target 2 lacs per month as my recurring income /Post retirement income as per current cost of living . Please advise how much and where I need to invest so as to reach my target. Below are details :- 1) Currently i have 2.8 lacs/month salary in hand out of which 80 k goes in payment of liabilities (loans) which will end by 2028. 2) Other monthly savings are like :- 50k in MF SIP , 20k in NPS SIP , 5 k (SSY) , 40k in PF , 80k in rentals 3) Currently I have approx 20 lacs in PF ,20 lacs in NPS and 8 lacs in SSY and I plan to invest in them for next 5 years as per break up mentioned in above point 4) I have 1 residential house worth 2 cr where i reside and besides that I have 1 residential worth 1.6 cr and 1 commercial worth 1.8 cr which gives me collective rental of 80 k as mentioned above
Ans: Your current financial position is strong, with a diversified portfolio across various asset classes. The regular monthly savings and rental income provide a steady foundation. As your liabilities will end in 2028, the reduction in debt payments will significantly increase your investable surplus.

The goal of generating Rs 2 lakh per month post-retirement income (as per current cost of living) requires careful planning, especially considering inflation and future needs. Based on your current situation, we can create a comprehensive investment strategy to help you achieve this goal within the next five years.

Let’s evaluate each part of your financial plan.

Monthly Savings
You are already investing Rs 50,000 in mutual fund SIPs, Rs 20,000 in NPS, Rs 5,000 in Sukanya Samriddhi Yojana (SSY), and Rs 40,000 in Provident Fund (PF). These regular investments will play a crucial role in achieving your retirement goal. Your monthly rental income of Rs 80,000 is also significant.

Here are insights for each investment:

Mutual Fund SIPs: SIPs are a good long-term investment strategy, especially for wealth accumulation. Consider reviewing your portfolio and focusing on funds with a consistent track record of performance. Actively managed funds may offer better growth opportunities than index funds.

NPS (National Pension Scheme): NPS is tax-efficient and gives you a good balance between equity and debt. However, withdrawals are partially taxable. You should continue this contribution, as it helps create a retirement corpus, but ensure you align it with your risk tolerance.

SSY (Sukanya Samriddhi Yojana): SSY is a great tax-saving option for your daughter’s future needs. However, it offers relatively low returns compared to equities. Continue contributing, but ensure this aligns with your overall financial goals.

PF (Provident Fund): PF contributions are essential for building a safe, debt-based retirement corpus. You may want to continue these contributions, as they provide stability.

Rental Income
You are earning Rs 80,000 per month from your residential and commercial properties. This income will be a valuable component of your post-retirement strategy. However, since rental income may fluctuate, it’s essential to have a diversified investment portfolio to ensure a steady income stream.

Existing Assets
Your current assets include:

Provident Fund (Rs 20 lakh)
NPS (Rs 20 lakh)
SSY (Rs 8 lakh)
These are solid base investments, but to reach your target of Rs 2 lakh per month post-retirement, additional investments in equity-based instruments and other options are necessary.

Strategy for Achieving Rs 2 Lakh Post-Retirement Income
To generate Rs 2 lakh per month post-retirement income, the focus should be on wealth accumulation for the next five years, followed by a structured withdrawal strategy.

Increase Equity Exposure for Higher Returns
Mutual Funds: Actively managed funds provide the potential for higher returns over the long term compared to index funds. Consider increasing your allocation to diversified equity mutual funds or multi-cap funds. You can continue with your SIPs but regularly review their performance. A Certified Financial Planner can help in selecting the right funds.

Direct vs Regular Funds: If you are currently investing in direct funds, you might not be getting the benefit of expert guidance. Regular funds through a Certified Financial Planner (CFP) give you access to professional advice, portfolio reviews, and timely adjustments, which can make a significant difference in achieving your retirement goals.

Debt Funds and Conservative Options
Debt Mutual Funds: These funds can provide a stable income post-retirement. However, the returns are taxed according to your income tax slab, which can reduce the net gain. Debt mutual funds are a good complement to your equity investments, providing a safer growth avenue.

PF & NPS: Continue with these contributions, as they provide tax benefits and form a part of your debt allocation. However, keep in mind that NPS withdrawals are partially taxed. You should aim to create a balance between tax efficiency and liquidity.

Retirement Corpus Calculation (Estimated)
Assuming you need Rs 2 lakh per month (Rs 24 lakh per year) and accounting for inflation over the next 10-15 years, you will need a significant corpus. To generate Rs 24 lakh per year at a 6% withdrawal rate, you would need approximately Rs 4-5 crore at retirement.

Additional Investments
To bridge the gap between your current savings and your retirement goal, consider the following:

Increase SIPs: As your liabilities reduce in 2028, you can increase your SIPs. An increase in SIPs by Rs 30,000 to Rs 40,000 per month over the next five years could substantially enhance your retirement corpus.

NPS Contribution: Increasing your NPS contribution to the maximum allowed limit will help boost your retirement savings in a tax-efficient manner.

Balanced Approach: A 60:40 equity-to-debt ratio could work well for you. This ensures that you are taking advantage of market growth while still having a stable portion of your portfolio in safer instruments.

Rental Property Considerations
Your rental income is an important source of cash flow, but property maintenance and other costs could reduce your net income over time. Therefore, it's crucial not to rely solely on rental income for post-retirement. Diversifying into financial assets that are easier to liquidate can provide more flexibility.

Tax Efficiency
Post-retirement income is subject to taxation, so it's essential to optimize your portfolio for tax efficiency.

Mutual Fund Taxation: Long-term capital gains (LTCG) above Rs 1.25 lakh in equity mutual funds are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%. For debt mutual funds, both LTCG and STCG are taxed as per your income tax slab.

NPS Withdrawal Tax: Remember that 60% of NPS withdrawals are tax-free, but 40% must be used to purchase an annuity, which is taxable.

Structuring your withdrawals to minimize tax impact will be a key component of your retirement plan.

Emergency Fund and Medical Coverage
Ensure that you maintain an emergency fund equivalent to at least 6 months of your expenses. Additionally, your health insurance should be robust, given that healthcare costs are rising. You may also want to review your existing policies to ensure they provide adequate coverage.

Finally
To achieve your goal of Rs 2 lakh per month post-retirement, you need to:

Increase your SIPs and focus on actively managed mutual funds.

Maximize your NPS and PF contributions for a stable retirement base.

Diversify into both equity and debt instruments for balanced growth and stability.

Consider the tax implications of withdrawals and aim for tax-efficient strategies.

Review your portfolio regularly with the help of a Certified Financial Planner to ensure you remain on track.

Best Regards,

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

..Read more

Nitin

Nitin Narkhede  |63 Answers  |Ask -

MF, PF Expert - Answered on Dec 31, 2024

Asked by Anonymous - Dec 25, 2024Hindi
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Sir I am 39 years old. I want to retire at age 50.Now I have 60 lacs in fd in different banks and post office. I have 3.5 lacs in Mutual Fund. I have different properties including home valuing approximately 3.5 Cr.I have no loan.What is my financial position exactly now.How should I plan to get 1 lac monthly after retirement.
Ans: You have a solid financial foundation , Having static property is good to have, unless it is creating any income, otherwise it will be consuming expenses for maintenance. about plan to get 1 lac monthly after retirement at 50 you need to plan certain investments, for 12L(1L per month) per year you need corpus of 3 CR . Retirement Corpus Allocation: Plan to Achieve Your Goal:
1. Maximize FD Efficiency- Shift ?30 lakhs from FDs to debt mutual funds or balanced advantage funds for better post-tax returns (~7-8%). Keep ?30 lakhs in FDs/post office for emergencies and stable returns. 2. Grow Mutual Fund Investments:
Increase equity exposure to at least ?50 lakhs by systematic investments of ?50,000/month in equity mutual funds (e.g., index funds, large-cap funds). By doing this your Expected returns: 10-12% over 10 years, growing the corpus to ~?1.2 crore.
3. Utilize Properties- Explore rental income or liquidate one property closer to retirement to add to your corpus.
If one property generates ?50,000 monthly, you’ll need a smaller investment corpus for the remaining ?50,000.
At retirement allocate-50% in debt funds/FDs for stability and regular income. 50% in equity mutual funds for growth and inflation adjustment. Build an Emergency Fund: Maintain ?10-15 lakhs for unforeseen expenses post-retirement.
Regards, Nitin Narkhede , Founder Prosperity Lifestyle Hub Community.

..Read more

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