I’m 40 years old, working as an IT consultant with a monthly in-hand salary of ₹1.5 lac (after NPS ₹5,865 and EPF ₹16,000) and ₹2 lac variable yearly. I have a ₹1 crore term plan (till 60), a ₹5 lac LIC policy (₹22,000 premium), ₹3 lac (ELSS fund ₹1500 monthly SIP, ₹2.5 lac in PPF (₹1,000 yearly), ₹5 lac in NPS, ₹4 lac in direct stocks and ₹21 lac in EPF. Health cover: ₹5 lac (with ₹5 lac top-up) from my employer, and ₹3 lac for my parents (₹50,000 premium yearly, 20% co-pay). Home loan: ₹22 lac balance, ₹29,000 EMI - 13 years remaining. Family: wife (homemaker - 34 year old) and two sons (8 & 1 year old). Total monthly expenses around (₹70K-₹75K) includes loan, insurance premium, kids education and home expenses etc. I have no dedicated investments for my kids yet. Please review and suggest what changes or additions I should make for their future, my retirement, and health coverage etc.

Ans: You have built a stable foundation with regular saving habits and a well-protected family structure. Having a steady income, EPF, term plan, and some long-term instruments is a very good start. Now, let’s assess your total financial position and see what improvements and alignments can help you secure your retirement, children’s education, and overall family protection.

» Current Financial Standing and Assessment

You have a stable job and consistent salary inflow of Rs. 1.5 lakh per month.

After mandatory deductions like EPF and NPS, your take-home structure is healthy.

Your household expenses including EMI and premiums are about Rs. 70,000–75,000.

This gives you reasonable flexibility to plan for future goals.

You already have investments spread across EPF, NPS, ELSS, LIC, PPF, and direct stocks.

But the structure seems scattered and lacks clear goal alignment.

A few of these are low-yield or inefficient instruments.

A streamlined plan can generate better long-term value without increasing risk.

» Term Insurance and Life Protection Review

You already hold Rs. 1 crore term insurance till age 60.

Considering your dependents and ongoing home loan, this may be slightly low.

You should ideally have coverage equal to 12–15 times your annual income plus loan balance.

That means your total coverage should be around Rs. 1.8 crore–Rs. 2 crore at this stage.

You can increase your cover by adding another term policy for the remaining gap.

Avoid endowment or ULIP type insurance because they give poor returns.

Always prefer a pure term plan for low cost and high protection.

Keep nominee details updated for smooth claim process.

» LIC Endowment Plan Review

Your LIC policy of Rs. 5 lakh is a traditional plan.

Such plans usually give around 4% to 5% yearly return only.

This return is much lower than inflation, so your real value reduces over time.

It neither gives enough insurance cover nor sufficient investment growth.

It is better to surrender this policy now.

The surrender value can be reinvested into a long-term diversified mutual fund.

This will improve both growth and flexibility for your future goals.

» EPF and NPS Position

Your EPF balance of Rs. 21 lakh is a solid foundation for retirement.

Continue contributing through your salary as this offers steady compounding.

Your NPS value of Rs. 5 lakh is also a long-term asset.

However, the NPS maturity rules restrict flexibility.

Only 60% is available at retirement, and 40% must be used for pension purchase.

So, avoid increasing voluntary NPS contribution beyond current level.

Instead, build retirement corpus through mutual funds for better liquidity and returns.

» PPF and ELSS Evaluation

Your PPF balance is Rs. 2.5 lakh with Rs. 1,000 annual contribution.

This small amount gives low compounding benefit.

You can use it only as a safe portion of your portfolio.

PPF return is fixed but lower than market-based returns.

Continue it till maturity but don’t increase contribution heavily.

Your ELSS fund SIP of Rs. 1,500 monthly is very small compared to your income.

You can raise this SIP gradually to build strong long-term wealth.

ELSS also gives tax benefit under Section 80C, which helps reduce tax outgo.

But always invest through a regular plan under Certified Financial Planner guidance.

Regular funds give you ongoing advisory support and timely rebalancing.

Direct funds lack this professional guidance and can lead to wrong fund mix.

» Direct Stocks Holding Review

You have Rs. 4 lakh in direct equities.

Equity investing requires time, research, and discipline.

Most retail investors underperform because of emotional decisions and poor timing.

Direct stocks can stay only as 10–15% of total investment if you enjoy market tracking.

The rest should go in diversified mutual funds where fund managers handle research.

Professional management ensures better risk control and steady growth.

» Home Loan Assessment

Your home loan of Rs. 22 lakh with Rs. 29,000 EMI for 13 years is manageable.

Interest portion reduces slowly, so prepayment in the first half helps a lot.

Try to make one or two extra EMIs every year.

It will reduce tenure and save a big interest amount.

However, do not divert your long-term investment money only for loan closure.

Maintain balance between debt repayment and wealth creation.

» Household Budget and Cash Flow Planning

Your current monthly expenses are within healthy limits.

You still have good capacity to save around Rs. 40,000–45,000 monthly.

Divide this surplus carefully among multiple goals.

Maintain one year’s expenses as emergency reserve in a liquid fund.

This will help during job loss or medical crisis without breaking investments.

Avoid using credit cards for long-term expenses to stay debt-free.

» Health Insurance and Medical Cover

Your company policy covers Rs. 5 lakh with Rs. 5 lakh top-up.

That means total coverage of Rs. 10 lakh for your family.

This may be sufficient now but will not remain enough as medical costs rise.

You should buy an independent family floater policy for Rs. 15–20 lakh.

It will secure you even if you change or lose your job.

Continue the Rs. 3 lakh cover for parents but upgrade it to Rs. 5–10 lakh.

Choose plans with restore benefit, no room rent capping, and lifetime renewability.

Select insurer with high claim settlement ratio and large hospital network.

Avoid policies that bundle return of premium features. They increase cost unnecessarily.

» Children’s Education and Future Planning

You have two children, aged 8 and 1.

Their education and future are your biggest long-term goals.

You should start dedicated goal-based investments now.

For your elder son, you have about 10 years before higher education starts.

For your younger one, you have 17 years ahead.

So, you can create two separate investment buckets.

Invest mainly in diversified equity mutual funds for long-term compounding.

For a 10-year goal, you can keep 70% in equity funds and 30% in hybrid funds.

For a 17-year goal, keep 80–85% in equity and rest in debt-oriented funds.

Review progress every year and reduce equity gradually as you near goal.

Avoid index funds as they track the market blindly and cannot outperform it.

Actively managed funds can adjust to market cycles and protect downside.

Invest through SIP mode monthly for disciplined saving and rupee-cost averaging.

» Retirement Planning and Long-Term Corpus Building

You are 40 now and have 20 years before retirement.

Your EPF and NPS will give a stable base but may not cover inflation fully.

You must build a separate retirement corpus through mutual funds.

Target at least Rs. 1 crore–Rs. 1.5 crore additional corpus in next 20 years.

Invest at least Rs. 25,000–30,000 monthly in diversified mutual funds.

Split between large-cap, flexi-cap, and hybrid categories for balance.

Use the regular plan route through a Certified Financial Planner for review and rebalancing.

Regular plan ensures continuous service, proper diversification, and goal tracking.

Direct plan lacks guidance and could lead to wrong allocation or panic selling.

Remember, retirement planning needs long-term patience and discipline.

Do not withdraw from retirement corpus for short-term needs.

» Emergency Fund and Short-Term Needs

Every family must have an emergency fund for sudden needs.

You can maintain Rs. 1 lakh–Rs. 1.5 lakh in your savings bank.

Keep another Rs. 4–5 lakh in a liquid mutual fund or ultra-short fund.

This will take care of job loss, medical costs, or big repair needs.

It prevents you from breaking long-term investments early.

» Insurance for Spouse and Children

Your wife is not working but she supports family care.

You can take a small term policy for her for Rs. 10–15 lakh.

It ensures family’s continuity if any unexpected event happens.

For children, no need for life insurance.

Instead, secure their future through education-linked investments.

» Tax Planning Optimisation

You are already using EPF, ELSS, and NPS for 80C deductions.

But you can still plan better for medical and other sections.

Health insurance premiums for self, spouse, and children give Rs. 25,000 deduction.

Parents’ health policy gives extra Rs. 50,000 deduction if they are senior citizens.

Keep investment decisions based on goals, not only on tax saving.

» Investment Portfolio Restructuring

You have too many small and scattered instruments.

Combine them into fewer goal-based categories.

For long-term goals like retirement and children’s future, use diversified mutual funds.

For medium-term goals like home renovation or vacation, use balanced funds.

For short-term needs like emergency, use liquid or ultra-short funds.

Avoid duplication between similar categories to keep tracking simple.

Review your portfolio once a year to stay aligned with goals and risk profile.

» Behavioural Discipline and Investment Attitude

Consistency is more important than timing in investment.

Keep SIPs running even during market correction.

Compounding works only when you stay invested long term.

Avoid comparing returns with friends or online data.

Your financial plan should match your goals, not others’.

Focus on peace and steady growth rather than chasing high returns.

» Financial Protection for Parents

You already provide health cover for parents.

Check if they have enough liquid savings for medical co-pay.

Avoid depending fully on your savings for their treatment.

You can build a small contingency fund only for parents’ health needs.

It will protect your other goals from getting disturbed.

» Lifestyle and Expense Planning

Continue to live within your means and avoid lifestyle inflation.

As income grows, increase savings proportionately, not just expenses.

Teach children about value of money and disciplined saving.

Small lifestyle control today will create big comfort later.

» Finally

You are doing very well for your age and responsibilities. You already have a strong base in EPF, NPS, and term insurance. By realigning your investments into goal-based mutual fund buckets, improving health cover, and increasing protection, you will achieve a financially peaceful future. Your family’s education, medical safety, and your retirement comfort can all be secured through consistent, guided actions. Review your plan every year with a Certified Financial Planner to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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