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Ramalingam

Ramalingam Kalirajan  |8324 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 09, 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
ANAND Question by ANAND on Jul 09, 2024Hindi
Money

Dear Sir, I am at verge of retirement shortly. I will be getting Rs.60 L. I am thinking of investing Rs.30 L in Senior Citizen scheme of Post Office. Request your suggestion whether this option is ok. If not, kindly advise where to invest this corpus and balance Rs.30 L. I am expecting Rs.50 K plus pm from the investment of Rs.60 L corpus. Kindly advise. Thanks in advance.

Ans: Congratulations on nearing your retirement! This is an exciting and crucial time. I understand your goal is to generate Rs. 50,000 per month from your Rs. 60 lakh corpus. Let's analyze and evaluate your investment options to help you achieve this goal.

Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme (SCSS) is a popular option. It provides a safe and secure investment with guaranteed returns. The interest rate is attractive compared to other fixed-income instruments. Additionally, SCSS offers tax benefits under Section 80C. However, there are limitations.

Advantages of SCSS:

Safety and security: Backed by the government.
Attractive interest rates: Higher than regular savings schemes.
Tax benefits: Deduction under Section 80C up to Rs. 1.5 lakh.
Disadvantages of SCSS:

Investment limit: Maximum of Rs. 15 lakh per individual.
Lock-in period: Five years, extendable by three years.
Interest rate risk: Rates may change, affecting future returns.
SCSS can be a good option for part of your corpus. Let's explore other options for the remaining Rs. 30 lakh to maximize your monthly income.

Mutual Funds
Mutual funds are a versatile investment option. They offer the potential for higher returns, diversification, and liquidity. By investing in mutual funds, you can balance risk and reward effectively.

Types of Mutual Funds:

Debt Funds: Low-risk, suitable for stable returns.
Equity Funds: High-risk, suitable for long-term growth.
Balanced Funds: Combination of equity and debt, balanced risk.
Advantages of Mutual Funds:

Diversification: Spreads risk across various assets.
Professional management: Managed by experienced fund managers.
Liquidity: Easy to buy and sell units.
Power of compounding: Reinvested earnings generate additional returns.
Disadvantages of Mutual Funds:

Market risk: Returns are subject to market fluctuations.
Management fees: Charges may reduce overall returns.
Debt Funds:

Debt funds invest in fixed-income securities like bonds, debentures, and government securities. They are less volatile and provide regular income.

Advantages of Debt Funds:

Stable returns: Lower risk compared to equity funds.
Tax efficiency: Better post-tax returns than fixed deposits.
Liquidity: Easy to redeem units when needed.
Disadvantages of Debt Funds:

Interest rate risk: Returns can be affected by changing interest rates.
Credit risk: Possibility of default by the issuer.
Equity Funds:

Equity funds invest in stocks and have the potential for high returns. They are suitable for long-term goals.

Advantages of Equity Funds:

High returns: Potential for significant capital appreciation.
Inflation protection: Returns can outpace inflation.
Tax benefits: Long-term capital gains tax advantage.
Disadvantages of Equity Funds:

Market volatility: High risk of short-term losses.
Market timing: Difficult to predict market movements.
Balanced Funds:

Balanced funds combine equity and debt investments. They aim to provide growth with stability.

Advantages of Balanced Funds:

Balanced risk: Mix of equity and debt reduces overall risk.
Diversified portfolio: Exposure to different asset classes.
Moderate returns: Potential for steady income and growth.
Disadvantages of Balanced Funds:

Moderate risk: Not as safe as pure debt funds.
Lower returns: May not match pure equity fund returns.
Systematic Withdrawal Plan (SWP)
An SWP allows you to withdraw a fixed amount from your mutual fund investment at regular intervals. It provides a steady income stream.

Advantages of SWP:

Regular income: Fixed withdrawals as per your requirement.
Tax efficiency: Gains taxed at lower rates compared to fixed deposits.
Flexibility: Modify withdrawal amount and frequency as needed.
Disadvantages of SWP:

Market risk: Withdrawals depend on fund performance.
Capital erosion: Withdrawals may reduce your capital over time.
Fixed Deposits (FDs)
Fixed deposits offer guaranteed returns and capital protection. They are a safe investment for conservative investors.

Advantages of FDs:

Guaranteed returns: Fixed interest rates.
Safety: Low risk of capital loss.
Easy to manage: Simple and straightforward investment.
Disadvantages of FDs:

Low returns: Interest rates are usually lower than inflation.
Taxable interest: Interest income is fully taxable.
Lock-in period: Premature withdrawals may incur penalties.
Monthly Income Schemes (MIS)
Post Office Monthly Income Scheme (POMIS) provides a regular monthly income with low risk. It’s a safe option backed by the government.

Advantages of MIS:

Regular income: Monthly interest payments.
Safety: Government-backed scheme.
Low risk: Suitable for conservative investors.
Disadvantages of MIS:

Low returns: Interest rates are not very high.
Investment limit: Maximum investment of Rs. 4.5 lakh per individual.
Lock-in period: Five years with limited liquidity.
Recommended Strategy
To achieve your goal of Rs. 50,000 per month, a diversified approach is advisable. Here’s a recommended strategy:

1. Invest in SCSS:

Allocate Rs. 15 lakh to SCSS. This provides safety, guaranteed returns, and tax benefits. Expect regular interest income.

2. Invest in Debt Mutual Funds:

Allocate Rs. 20 lakh to debt mutual funds. This provides stable returns, liquidity, and tax efficiency. Choose funds with a good track record.

3. Invest in Balanced Mutual Funds:

Allocate Rs. 10 lakh to balanced mutual funds. This provides growth potential with moderate risk. It helps balance your overall portfolio.

4. Systematic Withdrawal Plan (SWP):

Set up an SWP from your mutual fund investments. Withdraw Rs. 25,000 per month. This provides a regular income stream with tax efficiency.

5. Fixed Deposits (FDs):

Allocate Rs. 10 lakh to fixed deposits. This provides safety, guaranteed returns, and easy management. Use the interest income for monthly expenses.

6. Monthly Income Schemes (MIS):

Allocate Rs. 5 lakh to POMIS. This provides a regular monthly income with low risk. It's a safe option for conservative investors.


I understand that managing retirement finances can be challenging. Your goal is to ensure a comfortable and secure retirement. Diversifying your investments across different options will help you achieve this goal.

Final Insights
Investing in SCSS, mutual funds, FDs, and MIS can provide a balanced and diversified portfolio. This approach helps generate a steady income while minimizing risk. Regular reviews and adjustments will ensure your portfolio stays aligned with your goals.

Feel free to reach out for any further assistance. Your retirement is a significant milestone, and careful planning will help you enjoy it to the fullest.

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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Sanjeevji, which is the best option to invest senior citizen saving scheme in the post office or bank?
Ans: You primarily have the following four major options for investment as a senior citizen which differ from each other in the way they work. Their important characteristics are given below. If you wish to know more, they are readily available with just a bit of googling:-

1. Senior Citizen Savings Scheme (SCSS). A 5-year scheme, extendable by 3 more years, Maximum investment allowed is Rs 15 Lakhs. Only persons with age 60 and above can invest in it, with the exception of armed forces retired personnel where this limit is 50 years. Current rate of interest is 8% payable on a quarterly basis. Available through Post Office and select banks.

2. Post office Monthly Income scheme (POMIS). A 5-year scheme. Maximum investment allowed is Rs 4.5 Lakhs. Applicable for any adult. Current rate of interest is 7.1% payable on a monthly basis. Available through Post Office only.

3. Pradhan Mantri Vaya Vandana Yojana (PMVVY). It is an insurance policy-cum-pension scheme launched by Govt of India and administered through Life Insurance Corporation (LIC). Its current rate of interest is 8%, minimum entry age 60 years, duration of 10 years, and maximum amount allowed is Rs 15 Lakhs.

4. Bank FDs. Available with all the banks with a choice of tenures. Minimum deposit amount and rate of interest vary from bank to bank. Current rates of interest in State Bank of India for senior citizens are 7.25% for a 1-2 year deposit. Other banks are also similarly placed.

If you want to know more about such options, please go to the link https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx where further details and more such post office schemes are given out.

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sir I am 65 years old govt.pensioners..please advise better saving port folio to help me in old age as well as my grand daughter future ...education expenses...sir post office scheme is longterm investment which i could not use earlier....
Ans: I would like to refer to two myths here before I directly answer your question:-
1. Taking life-time to be minimum 90 years, we’re talking about at least 25 more years of living and investing. Hence, it is a myth that investing in older age should be in absolutely safe instruments since inflation doesn’t care for one’s age.
2. While bank FDs and post office instruments might give you steady returns, please remember that they will always give you returns which will be negative after catering for taxes and inflation. This means that the value of your portfolio will always keep decreasing if you fully invest in such instruments only.

Regarding a good investment portfolio for you, please invest as per your risk profile – meaning how much safety and volatility are you comfortable with – and your future requirements. You have mentioned that you are a govt pensioner, implying that you may be getting enough pension for your day-to-day living. So, make out a list of your future requirements (called financial goals). Then apply the formula that long term requirements go into volatile investments like stocks for better returns and short term into safer ones. On top of this, your risk-taking ability is imposed to give you percentage of safe and volatile investments that you should have.

Amongst the instruments to invest, bank FDs or debt mutual fund for safer investments and equity / hybrid mutual funds for longer term would be good for you. In FDs and debt MFs, try to take longer term investments since interest rates are quite high now. Avoid post office instruments like Senior Citizen Savings Scheme and PO MIS since they compulsorily give you an income which you probably do not need, and hence miss out on the compounding advantages.

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Hi sir, I am going to retire at 40. I.e, this year. I will have 55 lac retirement benefits. I don't have any knowledge of mutual fund or sip. My monthly pension wud be 36000. So I planned to put 30 lac in Senior citizen savings scheme to get 20500/-. What and where should I invest rest 25 lac to get better than FD/ kvp. I don't want to take risk on lifetime achieved fund.
Ans: Crafting Your Retirement Investment Strategy
Retiring at 40 is a significant milestone, and it's essential to make prudent investment decisions to safeguard your retirement corpus and ensure financial stability. Let's explore tailored investment options that align with your risk tolerance and financial goals.

Maximizing Returns on Retirement Benefits
Congratulations on your retirement! With retirement benefits of 55 lakhs and a monthly pension of 36,000, you're off to a good start. Maximizing returns on your retirement benefits is crucial for long-term financial security.

Senior Citizen Savings Scheme (SCSS)
Investing 30 lakhs in the Senior Citizen Savings Scheme to earn a monthly income of 20,500 is a conservative yet effective choice. SCSS offers guaranteed returns and capital protection, making it suitable for risk-averse investors like yourself.

Exploring Investment Options for the Remaining 25 Lakhs
Now, let's focus on the remaining 25 lakhs and explore investment avenues that offer better returns than FDs or KVPs without compromising your risk tolerance.

Fixed Income Investments
Consider allocating a portion of the remaining corpus to fixed income investments such as corporate bonds, debentures, or high-quality debt mutual funds. These options provide stable returns with relatively lower risk compared to equities.

Systematic Withdrawal Plans (SWP)
Another option is to invest in mutual funds with a SWP facility. SWP allows you to systematically withdraw a predetermined amount from your investment at regular intervals. Opt for debt-oriented balanced funds or conservative hybrid funds to minimize risk while aiming for better returns.

Regular Funds Investing through a Certified Financial Planner
Investing in regular funds through a Certified Financial Planner (CFP) offers several benefits. A CFP provides personalized advice, portfolio management, and regular reviews to ensure your investments are aligned with your goals and risk tolerance. With a CFP's guidance, you can navigate market uncertainties and optimize your investment strategy for better returns.

Ensuring Financial Stability in Retirement
Retiring at a young age requires careful planning to ensure financial stability throughout your retirement years. By diversifying your investment portfolio, minimizing risk, and seeking expert guidance, you can build a robust financial foundation that supports your lifestyle and aspirations.

Conclusion
Sandeep, retiring at 40 is a remarkable achievement, and it's essential to make wise investment decisions to preserve and grow your retirement corpus. By investing in a combination of conservative options like the Senior Citizen Savings Scheme and exploring alternative avenues for the remaining corpus, you can achieve your financial goals while safeguarding your lifetime achievements.

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I, a senior citizen, would like your suggestion for investing a retirement corpus, with a moderate risk appetite. I have already made some investments in Equity, MFs, FDs, Senior Citizen Saving Schemes & Post Office Schemes.
Ans: You have already diversified your investments wisely across equity, mutual funds, FDs, senior citizen savings schemes, and post office schemes. This indicates a well-thought-out approach. As a senior citizen, your focus should now shift to maintaining stability, generating consistent income, and growing your corpus within a moderate risk appetite.

Key Investment Objectives for Senior Citizens
Capital Preservation:
Safeguard your retirement corpus against unnecessary risks.

Regular Income:
Ensure stable and predictable income to meet monthly expenses.

Moderate Growth:
Invest a portion in moderate-risk instruments for inflation-beating returns.

Liquidity:
Keep funds accessible for emergencies or unforeseen expenses.

Strategies for Allocating Your Retirement Corpus
Emergency Fund:
Set aside at least 12 months of living expenses in liquid investments. Use options like liquid mutual funds or high-interest savings accounts.

Equity Allocation for Growth:
Retain a portion in equity funds for long-term growth. Opt for actively managed funds over index funds. Actively managed funds offer better potential returns, guided by experienced fund managers.

Debt Mutual Funds for Stability:
Debt funds provide stability and moderate growth. These are tax-efficient compared to FDs for investors in higher tax brackets.

Senior Citizen Savings Schemes:
Continue contributing to senior citizen savings schemes. They offer guaranteed returns and safety.

Monthly Income Plans (MIPs):
MIPs in mutual funds offer regular payouts and moderate growth. These are ideal for generating supplementary income.

Reviewing Your Mutual Fund Investments
Avoiding Over-Diversification:
If you hold too many mutual funds, it can dilute returns. Focus on 3-5 well-performing funds.

Invest Through Regular Plans:
Avoid direct mutual funds. Regular plans via MFDs guided by a Certified Financial Planner offer better advice and monitoring.

Evaluating FDs and Post Office Investments
Fixed Deposits (FDs):
FDs are safe but may not beat inflation. Use them only for short-term needs.

Post Office Schemes:
These offer reliable returns. Consider their lock-in periods before increasing your investments.

Ensuring Tax Efficiency
Mutual Fund Taxation:
Equity funds have LTCG above Rs 1.25 lakh taxed at 12.5%. Debt funds are taxed as per your income tax slab. Factor this into your withdrawal strategy.

Maximise Section 80C Deductions:
Continue using investments like senior citizen schemes to avail of 80C tax benefits.

Additional Considerations for Risk Management
Insurance Coverage:
Ensure you have adequate health insurance. Medical emergencies can strain your finances.

Avoid Investment-Linked Insurance Policies:
If you hold LIC or ULIP policies, evaluate their returns. Surrender underperforming ones and reinvest in mutual funds for better growth.

Avoid High-Risk Investments:
Steer clear of speculative instruments like high-risk equities or unregulated products.

Regular Monitoring and Reviews
Review your portfolio every 6-12 months. This ensures your investments align with your financial goals.

Rebalance the portfolio as required. For instance, shift equity gains into safer instruments during market highs.

Work with a Certified Financial Planner to receive expert advice tailored to your needs.

Final Insights
Your retirement corpus is a key resource for financial independence. A balanced strategy with moderate risk will secure regular income and inflation-beating growth. Diversify, review, and optimise your investments regularly for financial well-being.

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Chief Financial Planner,

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Sir, I wqnted your advise, regarding an investment. My building is going for re-development, there is a additional flat sale for about 1cr, which will be ready in about 3 years. Please can you advise is it worth to invest 1cr in additional flat, i have savings of about 1cr, or should i keep the 1cr as Fixed Deposit. I do not have knowledge about investment in mutual funds or SIP. Thanks to advise.
Ans: It's commendable that you're considering the best investment route for your Rs. 1 crore savings. Let's evaluate the options you've mentioned and explore a comprehensive approach to wealth creation.

Understanding Your Investment Options
1. Investing in the Additional Flat

Illiquidity Concerns: Real estate investments are typically illiquid. Selling a property can take time and may not fetch the expected price.

Maintenance and Other Costs: Owning an additional flat comes with recurring expenses like maintenance charges, property taxes, and potential renovation costs.

Market Volatility: Property prices can fluctuate based on various factors, including economic conditions and government policies.

Rental Income Uncertainty: If you're considering renting out the flat, rental yields in many Indian cities are relatively low compared to the property's value.

2. Keeping the Amount in Fixed Deposits (FDs)

Low Returns: FDs offer fixed returns, but these may not outpace inflation, leading to a decrease in real purchasing power over time.

Tax Implications: Interest earned from FDs is taxable as per your income slab, which can further reduce the net returns.

Lack of Flexibility: Premature withdrawal from FDs can attract penalties, limiting liquidity.

Exploring Mutual Funds as an Alternative
Given that you're new to mutual funds and SIPs, it's essential to understand their potential benefits:

Professional Management: Mutual funds are managed by experienced fund managers who make investment decisions based on thorough research.

Diversification: By investing in a mutual fund, your money is spread across various assets, reducing risk.

Liquidity: Most mutual funds offer high liquidity, allowing you to redeem your investment when needed.

Potential for Higher Returns: Historically, mutual funds, especially equity-oriented ones, have offered higher returns over the long term compared to traditional instruments like FDs.

Tax Efficiency: Mutual funds can be more tax-efficient, especially with the benefits available under certain sections of the Income Tax Act.

Recommended Approach
Considering your current situation and the pros and cons of each investment option:

Avoid Investing in the Additional Flat: Given the illiquidity, associated costs, and potential market volatility, investing in another property may not be the most efficient use of your funds.

Limit Exposure to FDs: While FDs offer safety, the returns may not be sufficient to meet long-term financial goals, especially after accounting for inflation and taxes.

Consider Mutual Funds for Wealth Creation:

Start with a Lump Sum Investment: Allocate a portion of your Rs. 1 crore savings into mutual funds, focusing on a mix of equity and debt funds based on your risk appetite.

Initiate SIPs: Set up Systematic Investment Plans to invest a fixed amount regularly, benefiting from rupee cost averaging and disciplined investing.

Consult a Certified Financial Planner: Given your unfamiliarity with mutual funds, seeking guidance from a certified professional can help tailor an investment strategy aligned with your financial goals.

Final Insights
Your initiative to seek advice before making a significant investment decision is commendable. By steering clear of additional real estate investments and limiting exposure to low-yield instruments like FDs, you can explore avenues like mutual funds that offer the potential for higher returns and greater flexibility. Engaging with a certified financial planner can further ensure that your investment strategy is well-aligned with your long-term financial objectives.

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I am 50 + yr Engg Graduate and working in Pvt sector in NCR and having approx 10 yrs to retirement. # The Combined Family income (Including Dividend & Interest) : Rs. 22 Lac / Annum. # Yearly Expenditure : Rs.13.1 Lac / Annum (Includes Insurance Premium , fee , Rent etc); # I am Staying in Rent ; I am Have a old parental Flat at Lucknow (Vacant) which will be sold off inleu of a new Flat in next 4-5 years time (Present Value of Flat is approx Rs. 75 Lac ; ) # Term Insurance till age 62 yrs: Sum Insured : Rs. 1.70 Cr ; # Health Insurance Floater : Covered till Rs. 50 Lacs. Portfolio : * MF-SIP : 1.80 Cr.; Monthly investment in SIP: ~ 65000/-. [MF SIP Selection is self] * Combined PPF : Rs.40 Lac * Sukanya Samriddhi Yojana : Rs. 6.0 Lac * Share Value: Rs.50 Lacs * FD with Pvt Financial institutions : Rs. 43 Lac. * Cash in Hand : Rs. 4-5 Lacs Major Expenditure to be done: (a) Higher Studies of Daughter: Going for PG - 1st yr & maybe later Phd. (b) Marriage of Daughter. (c) Higher Studies of Son : Presently in Class IX. (d) Marriage of Son . (e) Buying a new House. Pls advise : 1. How much Corpus will I have in next 10 yrs.? 2. How much should be the minimum corpus I should have at the time of my retirement so that it can last maybe for 25 + years post retirement? 3. Will I be able to achieve the reqd corpus? 4. What is the Likely monthly expenditure post my retirement ? 5. Can I share my List of SIP Portfolio with you so that same can be restructured by you ? 6. Should I go for a Professional Financial Planner ? regards
Ans: You have already done a lot of planning. Your awareness and discipline are strong. This gives you a great advantage for your retirement and children’s future.

Understanding Your Present Financial Snapshot
 

You are above 50 years of age and have around 10 years to retire.

 

Your yearly family income is Rs.22 lakh. Expenses are around Rs.13.1 lakh.

 

That means you are saving close to Rs.8.9 lakh yearly. That’s a strong surplus.

 

Monthly SIP is Rs.65,000. You have a solid SIP discipline in place.

 

Current MF SIP corpus is Rs.1.8 crore. That’s a significant base.

 

PPF corpus is Rs.40 lakh. That’s a good stable portion of your savings.

 

Shares are worth Rs.50 lakh. FD value is Rs.43 lakh.

 

You have Rs.4–5 lakh in liquid cash. Sukanya balance is Rs.6 lakh.

 

You are staying on rent. You have an old flat in Lucknow worth Rs.75 lakh.

 

You want to sell the flat in 4–5 years. Use funds for buying a new flat.

 

Health insurance floater of Rs.50 lakh is excellent.

 

Term insurance of Rs.1.7 crore till age 62 is also strong.

 

Likely Corpus in Next 10 Years
 

Your existing investments are already close to Rs.3.7 crore.

 

With SIPs and expected growth, this corpus will rise steadily.

 

Assuming consistent investment, the corpus could cross Rs.6 crore in 10 years.

 

This figure depends on SIP continuation, market returns, and investment review.

 

If you sell the flat in 5 years, you may get Rs.80–85 lakh or more.

 

That can also be redirected to another house purchase.

 

But remember, house is not an investment. It’s a utility asset.

 

It will not support retirement income unless sold or rented.

 

How Much Corpus Is Needed at Retirement?
 

Your current annual spending is Rs.13.1 lakh.

 

Post-retirement, this may reduce slightly. But not by much.

 

Assume 80% of current expenses will continue. That’s around Rs.10.5 lakh yearly.

 

Over 25+ years, this amount will rise due to inflation.

 

A safe minimum retirement corpus can be around Rs.5.5–6 crore.

 

This should cover lifestyle, healthcare, and emergency spending.

 

It also assumes a balanced investment portfolio post-retirement.

 

PPF, FDs, and some debt funds can give regular income.

 

Equity mutual funds should be continued partially for growth.

 

Can You Achieve the Required Corpus?
 

Yes, based on your present investments and habits, you are on track.

 

You must keep SIPs running without breaks for the next 10 years.

 

Increase your SIPs by 8–10% every year.

 

This single habit increases your total retirement corpus sharply.

 

Don’t withdraw from MF portfolio for house or other large expenses.

 

Use surplus from share sale or FD maturity for daughter’s or son’s needs.

 

Maintain separate goals. Don’t mix retirement and child-related funds.

 

Likely Monthly Expenses After Retirement
 

Your monthly spending may reduce, but not disappear.

 

House rent may go if you buy a flat. But other costs may rise.

 

Healthcare costs will rise as you age. So will travel and daily needs.

 

Monthly spending may be around Rs.80,000 to Rs.90,000 after retirement.

 

This will keep increasing due to inflation.

 

Plan for this by keeping a rising income source post-retirement.

 

Part of your MF portfolio must remain in equity to beat inflation.

 

Should You Restructure Your SIP Portfolio?
 

Yes. You can share your SIP portfolio. It should be reviewed in detail.

 

Fund selection must suit your goals, risk, and retirement timeline.

 

If SIPs are selected by self, mistakes may remain unnoticed.

 

Self-managed portfolios often carry duplication and poor diversification.

 

Review will ensure you hold right funds in correct proportion.

 

Regular rebalancing and fund replacement are also needed.

 

Avoid index funds. They copy the index. No expert decision-making involved.

 

Actively managed funds give better chances of outperformance.

 

A fund manager takes timely calls based on market data.

 

Direct Plans vs Regular Plans
 

Many people choose direct funds thinking returns will be more.

 

But direct plans give no advice, no monitoring, no fund review.

 

Wrong choices can erode gains, which you may not notice.

 

Investing through MFD with CFP support gives many advantages.

 

You get continuous guidance, strategy correction, and emotional discipline.

 

A small extra cost is worth it for safer long-term performance.

 

Use regular plans under a Certified Financial Planner to avoid mistakes.

 

Should You Hire a Certified Financial Planner?
 

Yes, it is the right time to do so.

 

You are close to retirement. No room for errors now.

 

One bad year or wrong withdrawal can hurt long-term stability.

 

A planner prepares a full retirement roadmap. Step-by-step.

 

Helps manage retirement income, investment allocation, and cashflow.

 

Plans for children’s education, marriage, and tax-saving.

 

Also prepares a Will, estate plan, and contingency system.

 

You have built wealth. A planner helps protect and grow it safely.

 

Other Action Points You Must Consider
 

Keep 6 months’ expenses in liquid mutual funds. That’s your emergency fund.

 

Keep track of new MF capital gains tax rules.

 

If equity MF gains exceed Rs.1.25 lakh in a year, excess is taxed at 12.5%.

 

If sold within one year, tax is 20% on profits.

 

For debt funds, all gains are taxed as per your income slab.

 

File taxes properly. Use Form 26AS and AIS to avoid mismatch.

 

Make a written Will. Register it if possible.

 

Update nominations in all mutual funds, FDs, and insurance.

 

Involve your spouse in all investment decisions. Keep them informed.

 

Retirement Income Management Strategy
 

Break your retirement portfolio into three buckets.

 

First: Emergency and liquidity. Use FDs and liquid funds here.

 

Second: Stable monthly income. Use PPF, debt mutual funds, and bonds.

 

Third: Long-term growth. Keep some mutual funds in equity.

 

Withdraw only what is needed. Keep rest invested.

 

Review once a year with your planner.

 

Children’s Education and Marriage Planning
 

PG for daughter is immediate. Use FD interest or surplus cash.

 

Don’t disturb mutual funds meant for retirement.

 

PhD is long-term. Plan SIPs separately for that.

 

Son’s education is 4–5 years away. Start new SIPs today.

 

Marriage cost is hard to predict. But start a separate investment for that now.

 

Keep gifts, bonuses, or land sale proceeds for such events.

 

Don’t allow such costs to delay or reduce your retirement corpus.

 

Final Insights
 

You are in a strong financial position. That itself is an advantage.

 

But with multiple goals ahead, clear planning becomes important.

 

Don’t self-manage complex portfolios at this stage.

 

Avoid real estate dependence. Use it only for living, not investing.

 

Stay away from index and direct funds. They don’t give personal strategy.

 

Increase SIPs each year. Tag each goal separately.

 

Use a Certified Financial Planner to guide your retirement strategy.

 

Update nominations, Will, and insurance coverage.

 

Monitor your retirement portfolio closely, but don’t panic with market ups and downs.

 

Stay invested. Think long-term. Follow a guided, reviewed plan.

 

You can retire comfortably and fulfil all family goals with peace of mind.

 

Best Regards,
 

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8324 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 07, 2025

Money
Dear sir, I am 46 yrs old investing in SIP of 25000 monthly last 4.5 Yrs in different companies mutual fund. I wants retire after 10 yrs and need a corpus of 5 crore. I have 2 children studying @ 6&8 grade. Invested in money back policy of 5-8 Lakh. 1C land purchased 2 yrs back. Comprehensive Health insurance is available for 5L yearly and Term insurance of 60L is available. Kindly let me know what sort of planning required.
Ans: It shows you are thinking ahead for your family and future. That itself is a great start.

Let’s break this down step by step.

 

Retirement Planning – 10 Years Away
 

You want Rs.5 crore in 10 years.

 

You are already investing Rs.25,000 monthly through SIPs. This is a good habit.

 

But just investing isn’t enough. The amount, fund selection, and review also matter.

 

Rs.5 crore is a big target. It needs a solid, focused investment plan.

 

You need to check whether Rs.25,000 per month is enough for this goal.

 

Based on typical growth rates, it may fall short. We need to increase SIPs gradually.

 

A Certified Financial Planner can help assess the exact shortfall. Then a step-wise plan can be made.

 

Your retirement plan should not depend on land. Land is not liquid. Selling it can take time.

 

Continue SIPs and increase it by 10% every year. That helps stay ahead of inflation.

 

Actively managed mutual funds should be selected. They give a better edge with expert fund manager decisions.

 

Index funds lack flexibility. They copy the index. No chance to beat the market.

 

With actively managed funds, the fund manager reacts fast to changes. That is an advantage.

 

Asset allocation should be reviewed every year. Rebalancing keeps the risk in control.

 

Keep a separate portfolio for retirement. Do not mix children’s education goal with this.

 

Children’s Education Planning
 

Your children are now in 6th and 8th grades.

 

In 6–8 years, you’ll need funds for their higher education.

 

Education costs are rising sharply. This cannot be ignored.

 

Start separate SIPs for their education goal now.

 

Do not depend on money-back policies for education.

 

These give low returns. Hardly beat inflation. Not suitable for education needs.

 

Surrender these policies. Reinvest the proceeds into mutual funds.

 

A Certified Financial Planner can guide on which policies to surrender and how.

 

Use mutual funds for better returns and flexibility.

 

Choose a mix of equity and balanced funds. This gives better growth with some safety.

 

Review this portfolio every year. Make changes if fund performance drops.

 

Never use retirement funds for education or other goals.

 

Keep clear boundaries between each financial goal.

 

Insurance Assessment – Life and Health
 

You have Rs.60 lakh term insurance. It is a good starting point.

 

But is it enough? Likely not.

 

A person at age 46 with children and a Rs.5 crore retirement goal needs more cover.

 

Term cover must be at least 12–15 times your annual income.

 

It should also cover children’s education and liabilities.

 

Top up your term insurance with an additional Rs.40–50 lakh at least.

 

Premiums are still manageable at your age.

 

Avoid ULIPs or money-back plans for life cover. They mix insurance and investment.

 

You have Rs.5 lakh health insurance. That is a positive step.

 

However, with rising medical costs, it is not enough.

 

Add a super top-up policy of Rs.10–15 lakh. It is cost-effective and gives added protection.

 

Ensure the entire family is covered under the policy.

 

Also keep some emergency fund in liquid funds for minor health expenses.

 

Emergency Fund and Contingency Planning
 

An emergency fund gives peace of mind.

 

It should cover at least 6 months of expenses.

 

Keep this in a liquid mutual fund or savings account.

 

Never invest emergency funds in equity or land.

 

Refill the fund if you use it anytime.

 

Existing Land Investment
 

You mentioned buying land two years ago.

 

It can be a personal asset. But not an investment.

 

Land does not generate regular income.

 

Selling land can take time. Liquidity is low.

 

Do not depend on land for your retirement or education goals.

 

Do not count land value in your net worth for investment planning.

 

Keep it as a reserve or personal utility asset only.

 

Money-Back Policies – Action Plan
 

You have Rs.5–8 lakh in money-back policies.

 

These offer low returns. Do not help in long-term wealth creation.

 

It is best to surrender these now. Don’t wait.

 

Reinvest that money into mutual funds through a Certified Financial Planner.

 

Use regular plans through MFDs. They offer continuous support and monitoring.

 

Direct mutual funds offer no guidance. That leads to mistakes and poor returns.

 

Regular funds give access to a CFP’s review and hand-holding.

 

Small cost difference, but better long-term results.

 

SIP Management – Next Steps
 

You are already investing Rs.25,000 monthly. That is commendable.

 

Increase it every year. This is called SIP step-up.

 

If your income rises, increase SIPs by 10–15% yearly.

 

This one habit helps you reach goals faster.

 

Choose 4–5 diversified equity funds. Review them every 6 months.

 

Use funds with consistent track records and experienced managers.

 

Avoid index funds. They are passive. No fund manager input.

 

Actively managed funds offer better opportunities.

 

Tax Planning – For Today and Tomorrow
 

Make use of Section 80C for tax savings. SIP in ELSS can help here.

 

Avoid locking too much in PPF or NSC. They are not flexible.

 

For capital gains tax, keep new rules in mind.

 

If you sell equity funds, gains above Rs.1.25 lakh are taxed at 12.5%.

 

If sold before 1 year, gains are taxed at 20%.

 

For debt funds, all gains are taxed as per your income slab.

 

Always check tax implication before switching or redeeming funds.

 

Goal-Based Investment Planning
 

Link each SIP to a specific goal.

 

One SIP for retirement.

 

One SIP for child 1 education.

 

Another SIP for child 2 education.

 

Do not combine goals. That leads to confusion later.

 

Clear goal tagging helps track progress.

 

A Certified Financial Planner can prepare this map for you.

 

Use colour-coded tracking for each goal.

 

Will, Nomination, and Estate Planning
 

Make a basic Will. Even if your assets are small today.

 

Nominate properly in every investment and insurance.

 

Review nominations every 2 years.

 

Teach your spouse the basics of your financial plan.

 

Keep one folder with all details – policies, accounts, mutual funds.

 

Inform your family where the file is kept.

 

Three Yearly Review System
 

Review your financial plan every year.

 

Do it with the help of a Certified Financial Planner.

 

Track SIP growth. Are goals on track?

 

Rebalance asset allocation if equity grows too much.

 

Check insurance covers every 2 years.

 

Update Will, nominations, and goals if needed.

 

Final Insights
 

You have taken important first steps. That shows awareness.

 

But awareness needs a plan to be successful.

 

Surrender low-yielding policies. Reinvest wisely.

 

Keep land aside. Do not count on it for goals.

 

Increase SIPs steadily. Choose only actively managed funds.

 

Use regular mutual funds through a Certified Financial Planner.

 

Protect family with higher life and health insurance.

 

Separate SIPs for each goal. Link every investment to a purpose.

 

Review your plan once every year. Adjust when needed.

 

Your dream of Rs.5 crore and children’s education is possible.

 

But you need focused, guided steps to reach there.

 

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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