Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |7606 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 07, 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
Deepa Question by Deepa on Dec 07, 2024Hindi
Listen
Money

What should be the corpus one should have in order to get 150000 per month post retirement ??

Ans: To determine the required corpus, let’s address key factors like expenses, inflation, withdrawal strategy, and longevity. A comprehensive plan ensures sustainability.

Factors Influencing Corpus
Monthly Income Requirement
Rs. 1,50,000 per month translates to Rs. 18,00,000 annually.

Inflation Impact
With an average inflation rate of 6%, future expenses will significantly increase.

Withdrawal Rate
A safe withdrawal rate is typically 3-4% per year. This ensures the corpus lasts throughout retirement.

Post-Retirement Investment Returns
Assume a conservative return of 7% from a balanced portfolio after retirement.

Longevity
Plan for a 30-35 year retirement horizon to ensure financial independence.

Calculating the Corpus
Using a 4% withdrawal rate, the corpus should be:
Rs. 18,00,000 ÷ 4% = Rs. 4.5 crore.

Adjust for Inflation:
If retirement is 10 years away and inflation is 6%, you’ll need about Rs. 8 crore to maintain the same lifestyle.

Steps to Build This Corpus
Increase Equity Exposure Now
High-growth equity funds can accelerate wealth accumulation during the pre-retirement phase.

Gradual Shift to Conservative Assets
Transition to hybrid or debt funds five years before retirement to protect the corpus from market volatility.

Systematic Withdrawals
Post-retirement, use SWPs in mutual funds to create a steady monthly income of Rs. 1,50,000.

Health and Emergency Funds
Maintain a separate contingency fund to handle medical emergencies and other unexpected costs.

Tax Implications
Equity Fund Withdrawals:
LTCG above Rs. 1.25 lakh taxed at 12.5%.

Debt Fund Withdrawals:
Taxed as per your income slab.

Plan withdrawals tax-efficiently to optimise cash flow.

Final Insight

With proper planning, achieving a corpus of Rs. 8 crore is feasible for a comfortable retirement. Consult a Certified Financial Planner to optimise your investments and roadmap.

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

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7606 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 2024

Asked by Anonymous - Apr 28, 2024Hindi
Listen
Money
I am 55 years old. Will retire in 5 years. I have a corpus of 40 Lacs in PF, LIC about 80 Lacs (Maturity Value), FD/MF about 25 Lacs. Do not have any major loans. Only some credit card Short Term EMIs are running. Major liability is kid’s higher education and marriage. What corpus do I need to have a monthly income of Rs 100000 after retirement?
Ans: Planning for Retirement and Future Financial Needs

Greetings! It’s great that you’re planning for a secure retirement and your children's future. Let's evaluate your current financial situation and determine how to achieve a monthly income of ?1,00,000 post-retirement.

Current Financial Situation
Age: 55 years
Time to Retirement: 5 years
Corpus:
Provident Fund (PF): ?40 lakhs
LIC Maturity Value: ?80 lakhs
FD/Mutual Funds: ?25 lakhs
Total Corpus: ?1.45 crores
Liabilities: Kid’s higher education and marriage, short-term credit card EMIs
Retirement Goals
Monthly Income Post-Retirement: ?1,00,000
Estimating Required Retirement Corpus
To estimate the required corpus, we need to consider the following factors:

Life Expectancy: Assume you need income for 30 years post-retirement.
Inflation Rate: Assume an inflation rate of 6% per annum.
Return on Investments: Assume a post-retirement return of 8% per annum.
Calculating the Corpus Needed
To achieve a monthly income of ?1,00,000, considering inflation and a safe withdrawal rate, the formula used is based on the annuity principle.

Annual Income Needed: ?1,00,000 x 12 = ?12,00,000
Inflation-Adjusted Withdrawal Rate: 4% (a conservative withdrawal rate to ensure sustainability)
Using the 4% rule, the required corpus is: 3 Crores.

Current Corpus and Shortfall
Current Total Corpus: ?1.45 crores
Required Corpus: ?3 crores
Shortfall: ?3 crores - ?1.45 crores = ?1.55 crores
Strategies to Bridge the Gap
1. Maximize Existing Investments
Provident Fund (PF): ?40 lakhs

Continue contributions to maximize maturity value.
LIC Maturity Value: ?80 lakhs

Ensure policies are maintained and maturity benefits are maximized.
FD/Mutual Funds: ?25 lakhs

Review mutual fund performance. Consider shifting underperforming funds to high-performing equity or balanced funds.
2. Additional Investments
Equity Mutual Funds:

Continue or increase SIPs in equity mutual funds to maximize growth. Equity funds have the potential to offer higher returns, crucial for building the required corpus in the next 5 years.
Balanced Advantage Funds:

Invest in balanced advantage funds for a mix of equity and debt exposure. These funds adjust based on market conditions, offering a balanced risk-return profile.
Public Provident Fund (PPF):

Maximize PPF contributions for safe, tax-free returns.
3. Reducing Liabilities
Pay off short-term credit card EMIs to reduce interest burdens. Focus on being debt-free by retirement.
4. Children’s Education and Marriage Planning
Separate Savings:

Create separate funds for your children's education and marriage. This ensures these major expenses are covered without impacting your retirement corpus.
Post-Retirement Investment Strategy
Upon retirement, invest your corpus in a mix of safe and growth-oriented instruments to ensure sustainability and regular income.

Senior Citizens' Saving Scheme (SCSS):

Invest in SCSS for secure, regular income with good interest rates.
Monthly Income Plans (MIPs):

Consider MIPs from mutual funds for regular income with some equity exposure.
Systematic Withdrawal Plan (SWP):

Use SWPs from mutual funds to provide a steady monthly income while keeping the corpus invested.
Conclusion
To achieve a monthly income of ?1,00,000 post-retirement, you need to accumulate a corpus of ?3 crores. With your current savings of ?1.45 crores, focus on maximizing returns through equity and balanced funds, reducing liabilities, and ensuring separate funds for your children’s education and marriage. Consulting a Certified Financial Planner (CFP) can provide personalized guidance and ensure your investment strategy aligns with your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Radheshyam

Radheshyam Zanwar  |1151 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Jan 22, 2025

Listen
Career
What should I do after my bsc in medical
Ans: Hello Priyanka.
It is not clear whether either of you has completed your B.Sc. in Medical or not. But I am assuming that you are presently pursuing it. The scope of this branch is wide. Either you can pursue the job, or you can start your own business. However, I would like to suggest that if possible, you do a DMLT course to start an authentic lab. Working as a technician or technical assistant may not boost your career to a great extent, and the salary may also not increase proportionately. Hence, it is better to add a course with a B.Sc. that will help you start your business. With a small capital, you can even start a business selling surgical items, which could turn into a big business in just a few years. Best of luck for your upcoming future.
If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

...Read more

Ramalingam

Ramalingam Kalirajan  |7606 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 22, 2025

Listen
Money
Where should I invest Rs. 50000 in Index mutual fund or in ETF?
Ans: When deciding between Index Mutual Funds, ETFs, and actively managed diversified equity funds, actively managed funds often stand out. Let’s analyse why active diversified equity funds are a better option for your Rs. 50,000 investment.

Understanding Index Funds and ETFs
Index Funds: These passively replicate an index like NIFTY 50 or SENSEX. They aim to match the market’s performance, not beat it.

ETFs (Exchange Traded Funds): Similar to index funds but trade like stocks on exchanges. They require a Demat account.

Disadvantages of Index Funds and ETFs
Limited Returns Potential
Index funds and ETFs only track the market.
They cannot outperform the benchmark, even when market conditions allow for superior performance.
No Protection in Market Downturns
Index funds replicate the index, so they fall equally during market downturns.
Active funds may reduce losses with better sector and stock allocation.
Lack of Professional Judgment
Index funds follow pre-set rules, ignoring company-specific fundamentals.
Actively managed funds use professional fund managers who adjust portfolios to maximise gains.
Hidden Costs in ETFs
ETFs may seem cost-effective but involve additional brokerage and Demat account charges.
Liquidity issues can lead to price variations between the market price and NAV.
Benefits of Active Diversified Equity Funds
Potential for Superior Returns
Experienced fund managers aim to outperform the benchmark.
They carefully select high-potential stocks across sectors and market caps.
Flexibility in Stock Selection
Active funds are not restricted to index stocks.
They pick companies with strong fundamentals, growth prospects, and attractive valuations.
Downside Protection
Fund managers can reduce exposure to risky sectors during market downturns.
This minimises losses compared to passive funds.
Tax Efficiency with Strategic Planning
Gains can be optimised with periodic review and rebalancing.
Active funds often deliver better after-tax returns over the long term.
Why Rs. 50,000 Fits Well in Active Diversified Equity Funds
A one-time investment of Rs. 50,000 deserves active management for maximised growth.
Over 5–10 years, active funds are better positioned to beat inflation and create wealth.
Suggested Allocation for Active Diversified Equity Funds
Large-Cap Equity Funds (30%-40%): Stability and consistent returns.
Flexi-Cap Equity Funds (40%-50%): Flexibility to invest across market caps.
Mid-Cap Equity Funds (20%-30%): Higher growth potential with moderate risk.
Key Considerations
Stay invested for at least 7–10 years for compounding benefits.
Review performance annually and rebalance if needed.
Avoid chasing short-term trends or reacting to market noise.
Final Insights
Index funds and ETFs are suitable for certain scenarios, but they lack active management benefits. By investing Rs. 50,000 in actively managed diversified equity funds, you can maximise returns, minimise risks, and benefit from professional expertise.

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.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x