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Ramalingam

Ramalingam Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 08, 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
Asked by Anonymous - Jul 07, 2024Hindi
Money

Hi, I’m 45 years old and working with private sector Bank. Having 2 kinds (son 15 years and daughter 12 years old). Planning to retire at the age of 55 and need to plan monthly income of 1.25 L. Kindly advise me better plan Current take home – 1.6 L PF balance – 35L (Monthly contribution – 19000k plus VPF – 9500) MF – 15L (Monthly 40K – equity and small cap) RD – (monthly 10K) FD – 3L Post office Sukanya Samriddhi scheme – 12.5 k monthly contribution Housing Loan – 12 L outstanding (Monthly 10K)

Ans: First, kudos to you for proactively planning your retirement. Managing your finances while working in a demanding job and planning for your kids' future is admirable. Let’s break down your situation and create a comprehensive plan to achieve your retirement goals.

Current Financial Snapshot
You are 45 years old and planning to retire at 55. Here’s a snapshot of your current finances:

Current Take Home Salary: Rs 1.6 lakh
Provident Fund (PF) Balance: Rs 35 lakh (Monthly contribution: Rs 19,000 plus VPF: Rs 9,500)
Mutual Funds (MF): Rs 15 lakh (Monthly SIP: Rs 40,000 in equity and small-cap funds)
Recurring Deposit (RD): Rs 10,000 monthly
Fixed Deposit (FD): Rs 3 lakh
Post Office Sukanya Samriddhi Scheme: Rs 12,500 monthly contribution
Housing Loan Outstanding: Rs 12 lakh (Monthly EMI: Rs 10,000)
Two Children: Son (15 years), Daughter (12 years)
Prioritizing Financial Goals
Retirement Planning
Children’s Education and Future
Early Loan Repayment
Let's dive deeper into each goal.

Retirement Planning
Retiring at 55 with a monthly income of Rs 1.25 lakh requires careful planning. Here’s how you can achieve this:

Evaluate Your Investments
You have a solid foundation with your PF, mutual funds, and other savings. To enhance your retirement corpus, diversification and strategic allocation are key.

Power of Compounding
Mutual funds, especially equity funds, leverage the power of compounding. By investing regularly and staying invested long-term, you can grow your wealth significantly.

Diversification of Mutual Funds
It's essential to diversify your mutual funds portfolio. Here’s how you can spread your investments:

Large-Cap Funds: Invest in well-established companies for stability.
Mid-Cap Funds: Invest in medium-sized companies with higher growth potential.
Small-Cap Funds: Invest in smaller companies for high returns but higher risk.
Balanced or Hybrid Funds: These funds mix equity and debt, balancing risk and return.
Increase SIP Contributions
Given your current salary, you can increase your SIP contributions. Allocating more towards diversified mutual funds will help you build a substantial retirement corpus.

Review and Adjust Your Portfolio
Regularly review your portfolio to ensure it aligns with your retirement goals. Adjust allocations based on market conditions and personal circumstances.

Children’s Education and Future
Planning for your children's education and future expenses is crucial. Here’s how to secure their future:

Dedicated Education Fund
Create a separate education fund for your kids. Equity mutual funds can be a good option due to their long-term growth potential.

Systematic Investment Plan (SIP)
Set up SIPs in mutual funds specifically for your children's education. This ensures you have a substantial corpus when needed.

Early Loan Repayment
Reducing your debt burden before retirement is vital. Here’s how you can tackle your housing loan effectively:

Lump-Sum Payments
Whenever you receive a bonus or any unexpected income, consider making lump-sum payments towards your housing loan. This reduces your principal amount and overall interest burden.

Prepaying with RD and FD Maturities
As your RDs and FDs mature, use a portion to prepay your housing loan. This strategy can significantly reduce your EMI burden and loan tenure.

Evaluating Current Investments
Provident Fund (PF)
Your PF balance is a significant asset for your retirement. Continue with your monthly contributions and VPF to maximize this benefit.

Mutual Funds (MF)
Your current mutual fund investment of Rs 15 lakh and monthly SIP of Rs 40,000 is a good start. Increase your SIPs to enhance this corpus. Diversify across different categories for balanced growth.

Recurring Deposit (RD) and Fixed Deposit (FD)
RDs and FDs provide safety but relatively lower returns. Consider gradually shifting some funds from RDs and FDs to higher-yielding investments like mutual funds.

Post Office Sukanya Samriddhi Scheme
Your contribution of Rs 12,500 monthly towards this scheme is commendable. It’s a secure way to save for your daughter's future.

Insurance Coverage
Life Insurance
Ensure your life insurance cover is sufficient to cover any outstanding liabilities and your family's needs in case of any eventuality. Reviewing your coverage periodically is essential.

Health Insurance
Ensure your family health insurance cover is adequate. Regularly review it to meet rising healthcare costs.

Strategic Investment Allocation
Here’s a suggested allocation for your additional investments:

Increase SIPs in Mutual Funds: Allocate a significant portion of your savings towards diversified equity mutual funds.
Prepay Housing Loan: Use RD and FD maturities and any surplus funds for lump-sum payments towards your housing loan.
Dedicated Education Fund: Set up separate SIPs for your children's education.
Regular Review and Adjustment
Review your financial plan regularly. Adjust your investments and savings based on changes in your financial situation and market conditions. Consulting with a Certified Financial Planner (CFP) periodically can help ensure you’re on track to meet your goals.

Final Insights
Balancing long-term goals like retirement, medium-term goals like children’s education, and short-term goals like early loan repayment is key. By diversifying your investments, making strategic loan prepayments, and saving diligently, you can achieve financial stability and enjoy a comfortable retirement at 55.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
Asked on - Jul 09, 2024 | Answered on Jul 09, 2024
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Dear Sir, Thanks for the detailed analyse and suggestion. Will adopt the suggestion of moving RD to SIP. Also, the insurance.
Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
Asked on - Jul 24, 2024 | Answered on Jul 24, 2024
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Sir, With your advice, I’ve increased my monthly SIP to 10K for each of the following 1. SBI BlueChip, 2. SBI Small Cap , 3. Axis BlueChip, 4. HDFC Mid Cap , 5. HDFC Small Cap. Also I'm closely monitoring the market with my limited knowledge. Kindly suggest me if any changes in the above
Ans: Your increased SIPs in diversified funds are a positive step. Given market dynamics, consulting a Certified Financial Planner (CFP) will provide tailored advice and ensure your investments align with your long-term goals. Regular reviews and adjustments are essential.

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 Kalirajan  |7012 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2024

Asked by Anonymous - Jul 21, 2024Hindi
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I am 28 year old. I have monthly household income of 1.5 lakhs all included. I own a home. I bought another home of 30 lakhs with 40K emi with rental income of 12k completeting in jan 2027. I have SIP of 14k equaly divided in large-mid-small cap. 30k monthly expense. Son aged 4 month. I live with parents. Have a health insurance of 10 lakh. No saving in saving account. Currently I am diverting all saving in loan aiming to bring maturity of loan down from 2031 to 2024. I want to retire by 50 and would need monthly income of 5lakhs to survive. Please suugest a plan.
Ans: You are 28 years old with a household income of Rs. 1.5 lakhs per month. Your monthly expenses are Rs. 30,000. You own a home and bought another home for Rs. 30 lakhs with a rental income of Rs. 12,000 and an EMI of Rs. 40,000. This loan will be completed by January 2027. You have SIPs of Rs. 14,000 divided equally among large, mid, and small-cap funds. You also have health insurance of Rs. 10 lakhs. Your goal is to retire by 50 with a monthly income of Rs. 5 lakhs.

Current Financial Priorities
Loan Repayment
You are focusing on repaying your home loan by 2024. This is good as it reduces your debt burden early. However, balance loan repayment with investment for future goals.
Emergency Fund
Create an emergency fund. It should cover 6-12 months of expenses. This provides a safety net for unexpected situations.
Investment Strategy
Diversified SIPs
Continue your SIPs in large, mid, and small-cap funds. These offer growth potential. However, review and adjust your portfolio regularly to ensure alignment with your goals.
Actively Managed Funds
Actively managed funds often outperform index funds. They offer professional management and can adjust to market changes. Consider working with a Certified Financial Planner to choose the right funds.
Direct Funds vs. Regular Funds
Direct funds may have lower costs but lack professional guidance. Regular funds through a Certified Financial Planner provide expert advice and better fund selection.
Retirement Planning
Monthly Retirement Income
To achieve a monthly retirement income of Rs. 5 lakhs, you need a substantial corpus. Estimate your future expenses and inflation. A Certified Financial Planner can help determine the required corpus.
Systematic Investment Plan (SIP)
Increase your SIPs as your income grows. This builds your retirement corpus over time. Diversify your investments to balance risk and return.
Child's Future and Family Security
Education Fund
Start an education fund for your son. Invest in a mix of equity and debt funds to balance growth and safety.
Health and Life Insurance
Ensure your health insurance is adequate. Consider a top-up plan if needed. Assess your life insurance needs. Ensure your family is financially secure if something happens to you.
Financial Discipline and Monitoring
Regular Review
Review your financial plan regularly. Adjust your investments based on changes in your life and market conditions.
Professional Guidance
Work with a Certified Financial Planner. They provide personalized advice and help you stay on track to meet your goals.
Final Insights
Your plan to repay your home loan early is commendable. However, balance this with building your investment portfolio. Create an emergency fund, continue SIPs, and plan for your child's future. Regular reviews and professional guidance will help you achieve your retirement goal of Rs. 5 lakhs per month.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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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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