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Widow with young child: How to invest terminal benefits for education and living expenses?

Milind

Milind Vadjikar  |1039 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Dec 24, 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
Asked by Anonymous - Dec 23, 2024Hindi
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I am a widow aged about 48years and have a son of 2 and half year old.How can I invest the terminal benefit of my husband for my child education and dat to day expenses? I am getting family pension.

Ans: Hello;

You may buy immediate annuity from a life insurance company for the lumpsum amount you received.

Select the option of annuity for life with return of purchase price to your nominee.

Annuity will provide you monthly income alongwith family pension.

After fulfilling regular expenses you may invest the balance through monthly sip into a combination of mutual fund schemes that suit your financial and risk profile.

Do earmark some 6-8 months expense coverage as emergency fund in your saving account.

Also buy an adequate term life insurance and healthcare insurance for yourself and your kid.

Please seek advice from a investment advisor or a certified financial planner if you feel so.

Best wishes;
X: @mars_invest
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  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 21, 2024

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I will retire from my job in next three months. I will get a pension of rs 56000, and pf and other benefits for rs 52 laks. Have my own house and will get rent of rs 35000. Daughter is married but i have a mentally challenged son. Can you suggest me how to invest my retirement benefits of 52 lakhs.
Ans: You are retiring soon and will receive a pension of Rs 56,000 per month, along with Rs 52 lakhs in provident fund (PF) and other benefits. You also own a house that generates Rs 35,000 in rent. Your daughter is married, but you have a mentally challenged son who will need long-term financial support.

Assessing Your Monthly Income and Expenses
Total Monthly Income: Your combined income from pension and rent is Rs 91,000. This provides a stable monthly cash flow.

Essential Expenses: It's crucial to assess your monthly living expenses, including medical care for your son. This will help determine how much of your monthly income is needed for daily expenses and how much can be saved or invested.

Emergency Fund Allocation
Creating a Safety Net: Allocate a portion of your Rs 52 lakhs to an emergency fund. This fund should cover at least 12 months of living expenses and any unforeseen medical costs for your son.

Safe Investment Options: Keep this emergency fund in safe and liquid options like fixed deposits or short-term debt funds. This ensures quick access to funds without risking capital.

Long-Term Care for Your Son
Dedicated Corpus: Set aside a significant portion of your Rs 52 lakhs for your son's long-term care. This corpus should be invested in low-risk options to ensure steady growth while preserving capital.

Consider Trusts: Explore setting up a trust for your son. This ensures that his financial needs are met even after your lifetime. A Certified Financial Planner (CFP) can guide you on how to structure this trust effectively.

Investment Strategy for Retirement Corpus
1. Conservative Debt Funds
Capital Preservation: Invest a portion of your retirement corpus in conservative debt funds. These funds provide steady returns with minimal risk, making them ideal for retirees.

Regular Income: Debt funds can also generate a regular income stream, supplementing your pension and rent.

2. Monthly Income Plans (MIPs)
Additional Monthly Income: Monthly Income Plans (MIPs) invest primarily in debt with a small equity component. They offer the potential for higher returns while still prioritizing safety.

Supplement Your Pension: MIPs can provide an additional income stream to cover any shortfalls in your monthly expenses.

3. Senior Citizens' Savings Scheme (SCSS)
Safe Investment: The Senior Citizens' Savings Scheme (SCSS) is a government-backed scheme offering regular interest payments. It is one of the safest options for retirees.

Regular Payouts: SCSS provides quarterly interest payouts, ensuring a steady cash flow. You can invest up to Rs 15 lakhs in this scheme.

4. Post Office Monthly Income Scheme (POMIS)
Fixed Monthly Income: The Post Office Monthly Income Scheme (POMIS) offers a fixed monthly interest payout, providing a reliable income stream.

Low Risk: POMIS is a low-risk investment, making it a good option for preserving capital while earning steady returns.

5. Balanced Mutual Funds
Controlled Risk: Balanced mutual funds invest in a mix of equity and debt. They offer moderate growth potential with controlled risk, suitable for retirees looking for some equity exposure.

Potential for Growth: While these funds are riskier than debt funds, they offer better returns. A small allocation can help grow your corpus over time.

Insurance and Health Care Planning
Health Insurance: Ensure that you and your son have adequate health insurance coverage. Medical costs can be a significant burden, especially in retirement. Consider top-up or super top-up plans to enhance your existing coverage.

Term Insurance: If you don’t already have term insurance, consider getting a policy. It can provide financial security to your family in your absence.

Planning for Inflation
Inflation Protection: It's important to invest a portion of your corpus in options that can outpace inflation. This ensures that your purchasing power is maintained over time.

Balanced Portfolio: A mix of debt and balanced funds can help manage inflation risk while providing stability.

Avoiding High-Risk Investments
Stay Away from High-Risk Options: Given your need for financial stability, avoid high-risk investments like equities, commodities, or volatile funds. These can lead to significant losses, which could be detrimental in retirement.

Focus on Capital Preservation: Prioritise investments that protect your capital and provide steady, reliable income.

Estate Planning and Will Preparation
Creating a Will: Ensure you have a will in place to clearly outline how your assets should be distributed. This will prevent legal complications and ensure your son's needs are met.

Nominees and Beneficiaries: Review and update the nominees on all your financial accounts and investments. This will ensure a smooth transfer of assets to your son or other family members.

Finally
Your retirement plan should focus on stability, regular income, and long-term security for your son. Prioritize low-risk investments, ensure you have an adequate emergency fund, and consider setting up a trust for your son. With careful planning, your Rs 52 lakhs can be invested wisely to secure your family's future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

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I am 61 years and retired from central government. Getting 48000 and 30000 as pension and rent. All my retirement benefits are exhausted on building of house and education loan. I need 5000000 fifty lakhs in seven years. What i should do. This amoint to be given to my son and what way i accummulate.
Ans: I appreciate your commitment to helping your son. Let's explore ways to accumulate Rs 50 lakhs in seven years.

Evaluate Current Income and Expenses

Track your monthly income of Rs 78,000. Prioritise your essential expenses and find areas to save.

Create an Investment Plan

Consider investing in mutual funds. Actively managed funds often outperform index funds, especially in volatile markets.

Benefits of Actively Managed Funds

Actively managed funds are handled by expert fund managers. They can adapt strategies based on market conditions.

Systematic Investment Plan (SIP)

Start a SIP to invest regularly. This helps in averaging costs and reduces market risk.

Consider Balanced Funds

Balanced funds invest in both equity and debt. This provides growth and stability.

Emergency Fund

Set aside a small amount each month for emergencies. This ensures financial security without touching investments.

Avoid Real Estate and Annuities

Real estate can be illiquid and risky. Annuities often have high fees and low returns.

Seek Professional Advice

Consult a Certified Financial Planner. They can tailor a plan to help you achieve your goal.

Stay Committed and Review Regularly

Monitor your investments and make adjustments if needed. Stay focused on your goal.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 19, 2025

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I have utilised my sale proceedings and hence the entire capital gains by registering a new flat, but the entire payment is not released to the builder. It will be released in a phased manner as per progress of the building. Do I still need to open a CGAS account and put the unutilized capital gains money there?
Ans: Since you have already registered the new flat and fully committed the capital gains towards its purchase, you do not need to open a Capital Gains Account Scheme (CGAS) account. However, there are some key points to consider:

1. Conditions for Capital Gains Exemption (Section 54 or 54F)
You must invest the capital gains in a new residential property within 2 years (for resale property) or within 3 years (for under-construction property).
Since you have registered the property, your investment is considered "committed" even if payments are made in phases.
The Income Tax Department typically considers the date of agreement/registration as the date of investment, not the date of actual payment.
2. When is a CGAS Account Needed?
A CGAS account is required only if the capital gains money is not used before the Income Tax Return (ITR) filing deadline (July 31st) of the respective financial year.
Since your funds are already allocated towards the flat purchase, you are not required to park them in CGAS, even if disbursement is pending.
3. Ensure Proper Documentation
Keep records of the flat registration, builder agreement, and payment schedule.
Retain proofs of capital gains utilization from the sale proceeds.
If assessed, you can justify that the gains were committed for the property purchase.
Final Insights
Since you have already registered the new flat and the payment schedule is fixed, you do not need a CGAS account. However, ensure that all payments are completed within 3 years to comply with exemption rules. Keep all documents handy in case of future tax scrutiny.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 19, 2025

Asked by Anonymous - Feb 19, 2025Hindi
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Is it wise to switch between debt and equity composition within a mixed fund/ULIP depending on the market, for a long term investor? Considering that NAVs will be lower in equity components during market lows and more units could be purchased for the same SIP amount? When the market moves up switch back to get a larger NAV r equity components.
Ans: Switching between debt and equity within a mixed fund or ULIP based on market movements may seem like a smart strategy. The idea is to buy more equity units when the market is down and shift to debt when the market is high. However, in practice, this approach has several risks and limitations.

Here’s a detailed analysis:

1. Challenges of Market Timing
Difficult to Predict Market Lows and Highs

Markets do not move in a straight line.
A dip may continue further, and a peak may not be the highest point.
Many investors switch at the wrong time, missing out on gains.
Emotional Biases Impact Decisions

Fear and greed affect switching decisions.
Many investors switch to debt in panic during a crash and miss the recovery.
Staying invested in equity gives better long-term returns.
ULIPs Have Lock-ins and Charges

ULIP switching may have limits and charges.
Not all ULIPs offer unlimited free switches.
Frequent switching can increase costs and reduce returns.
2. Impact on Long-Term Growth
Compounding Works Best with Consistency

Switching in and out disrupts long-term growth.
Staying in equity for 10+ years gives better returns.
Debt Returns Are Lower

Equity outperforms debt over the long term.
Shifting to debt may reduce overall returns.
Systematic Investments Work Better

SIPs average out market ups and downs.
No need to manually switch between equity and debt.
3. Better Alternatives to Switching
Asset Allocation Based on Goals

If retirement is 20+ years away, equity should be dominant.
If retirement is near, gradually move to debt.
Hybrid Funds Handle Allocation Automatically

Some hybrid funds adjust between debt and equity based on market conditions.
This reduces the need for manual switching.
Investing More During Market Lows

Instead of switching, increase SIPs when the market falls.
This allows more unit accumulation without timing risk.
Final Insights
Switching between debt and equity in a mixed fund or ULIP based on market timing is risky. Long-term investors benefit more from staying invested in equity. Instead of switching, follow a structured asset allocation strategy. Use SIPs to take advantage of market lows rather than manually shifting between asset classes.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 19, 2025

Money
I am 33 years old and married, currently earning an in-hand salary of ₹1.6 crore per annum. My financial portfolio consists of: Stock investments: ₹2.2 crore Mutual funds: ₹70 lakh ULIP portfolio: ₹60 lakh (annual premium ₹22 lakh) Gold holdings: ₹50 lakh Loans: ₹23 lakh car loan (EMI ₹38,000) and ₹40 lakh home loan (EMI ₹38,000) I want to ensure that I am on the right path toward financial growth and early retirement. My goal is to achieve financial freedom while maintaining a comfortable lifestyle. Could you provide guidance on: How to optimize my portfolio for higher returns and passive income?
Ans: Your financial position is strong. Your salary is high, and you have a diversified portfolio. However, there is scope for better returns and passive income. A structured plan will help you reach financial freedom faster.

Here’s a detailed breakdown:

1. Review of Your Current Investments
Stock Investments: Rs 2.2 crore
You have a large stock portfolio.

Stocks give high returns but carry risk.

Review the portfolio for weak stocks.

Ensure a mix of large, mid, and small-cap stocks.

Check if some stocks need profit booking.

Reinvest gains into high-potential stocks or mutual funds.

Keep 15-20% of the portfolio in dividend-paying stocks for passive income.

Mutual Funds: Rs 70 lakh
Mutual funds provide stability with growth.

Avoid over-diversification with too many schemes.

Actively managed funds can outperform passive funds.

Check fund performance over 5+ years.

Increase SIPs for long-term wealth creation.

Ensure a balance of equity, hybrid, and debt funds.

Debt funds help with stability but are taxed at your income tax slab.

ULIP Portfolio: Rs 60 lakh (Annual Premium Rs 22 lakh)
ULIPs combine insurance with investment.

Charges are high, reducing overall returns.

Returns from ULIPs are lower than mutual funds.

Consider surrendering and reinvesting in mutual funds.

Use a pure term plan for life insurance instead.

Gold Holdings: Rs 50 lakh
Gold is a hedge against inflation.

It does not generate passive income.

Physical gold has storage and security issues.

Consider gold ETFs or sovereign gold bonds.

Sovereign gold bonds provide interest income.

Loans: Rs 63 lakh (Car Loan Rs 23 lakh, Home Loan Rs 40 lakh)
Your EMIs are Rs 76,000 per month.
Interest on a home loan is tax-deductible.
Car loan interest is an expense, not an investment.
Consider repaying the car loan early.
Continue home loan if the rate is low.
2. Steps to Optimize Your Portfolio
Increase Passive Income
Invest in dividend-paying stocks.

Add high-dividend mutual funds.

Consider corporate bonds for steady returns.

Invest in REITs for rental income without buying property.

Use sovereign gold bonds for extra interest.

Enhance Mutual Fund Investments
Increase SIPs in actively managed funds.

Ensure sectoral and market cap diversification.

Hybrid funds offer stability and good returns.

Debt funds help balance the portfolio.

Review fund performance every year.

Improve Liquidity
Maintain an emergency fund of Rs 25-30 lakh.

Keep it in liquid funds or high-interest savings accounts.

Avoid locking funds in long-term ULIPs or endowment plans.

Reduce Unnecessary Costs
ULIP charges are high; shift to mutual funds.

Car loan has no tax benefit; consider prepayment.

Ensure you are not overpaying for insurance.

Avoid investing in low-return insurance products.

Maximize Tax Efficiency
LTCG on equity mutual funds above Rs 1.25 lakh is taxed at 12.5%.
STCG is taxed at 20%.
Debt fund gains are taxed as per your income slab.
Invest in tax-efficient instruments like ELSS funds.
Use HUF and spouse’s name for tax-saving investments.
3. Financial Freedom Plan
Target Passive Income for Early Retirement
Aim for passive income of Rs 1 crore per year.

Invest in high-yield assets like dividend stocks and debt funds.

REITs and bonds provide stable income streams.

SIPs in equity mutual funds create wealth for future income.

Portfolio Allocation for Financial Growth
Equity: 60-65% (Stocks + Equity Mutual Funds)

Debt: 20-25% (Debt Mutual Funds + Bonds)

Gold: 10-15% (SGBs + Gold ETFs)

Emergency Fund: 5% (Liquid Fund + Savings)

Review and Adjust Yearly
Review stocks and mutual funds yearly.
Exit underperforming investments.
Rebalance portfolio as per risk appetite.
Adjust allocation based on market conditions.
Final Insights
Your financial position is strong. Your income allows you to invest aggressively. Focus on increasing passive income for early retirement.

Shift from ULIPs to mutual funds for better returns.
Increase investments in actively managed equity funds.
Reduce high-interest loans and unnecessary costs.
Diversify across asset classes while maintaining liquidity.
Aim for tax-efficient investments to maximize post-tax returns.
If you follow this structured approach, financial freedom is achievable. A well-balanced portfolio with growth and income assets will ensure a comfortable future.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 19, 2025

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I have taken a floating home from Axis Bank for 30 lakh last year, with a interest rate of 8.5%, i have also prepaid 5 Lakh within five months, now i have an outstanding amount of arround of 24 lakh, as the RBI reduced the repo rate, Bank is refusing to reduce interest rate from 8.5% to 8.25%. please suggest what should i do now?
Ans: You took a floating-rate home loan from Axis Bank at 8.5% interest.
You prepaid Rs 5 lakh within five months, reducing your outstanding amount to Rs 24 lakh.
RBI reduced the repo rate, but Axis Bank refuses to lower your rate to 8.25%.
Why Your Interest Rate Is Not Reducing
Banks do not always pass repo rate cuts immediately to all borrowers.
Some loans are linked to MCLR (Marginal Cost of Funds Based Lending Rate), which adjusts slowly.
New loans might be under RLLR (Repo Linked Lending Rate), which reacts faster to RBI rate cuts.
Your loan agreement decides how and when rate cuts apply.
What You Can Do
1. Ask for a Rate Reduction
Request Axis Bank to switch your loan to an RLLR-based loan.
Banks charge a conversion fee, but it might save you lakhs in interest over time.
2. Compare with Other Banks
Check other banks' home loan rates for balance transfer options.
If a bank offers a lower rate, consider switching the loan.
Ensure the processing fee & charges don’t negate the benefit.
3. Negotiate with Axis Bank
If you have a good repayment record, negotiate for a lower spread or margin.
Mention that other banks offer better rates, increasing your bargaining power.
4. Make Partial Prepayments
If you have extra savings, consider small prepayments to reduce interest burden.
Prepaying reduces the principal, which lowers total interest paid.
5. Use a Home Loan Overdraft Account
Check if Axis Bank offers a home loan overdraft facility.
You can park surplus money and withdraw when needed, reducing interest payments.
Best Action Plan
Contact Axis Bank and request a switch to an RLLR-based loan.
Compare other banks for balance transfer options.
Negotiate for a lower spread if staying with Axis Bank.
Consider prepayments to reduce long-term interest costs.
By taking the right step now, you can save a significant amount on interest payments.

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8013 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 19, 2025

Asked by Anonymous - Feb 18, 2025Hindi
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I have sold a plot worth for 1.85 cr... I have bought a plot worth 1.4 cr... can i keep the remaining in my saving account for house construction or do i put the balance amount in a cgas account
Ans: Since you sold a plot for Rs 1.85 crore and purchased another plot for Rs 1.4 crore, you have a balance of Rs 45 lakh.

Capital Gains Tax Implication
Long-Term Capital Gains (LTCG): If the plot you sold was held for more than 2 years, the profit is considered long-term capital gains (LTCG) and is subject to tax.
Tax Rate: LTCG on real estate is taxed at 20% with indexation benefit.
Reinvestment for Tax Saving: You can save tax by reinvesting the gains in a residential property under Section 54F of the Income Tax Act.
Can You Keep Rs 45 Lakh in a Savings Account?
No, if you intend to claim tax exemption under Section 54F, you cannot keep the balance amount in a savings account beyond the due date for filing your Income Tax Return (ITR).
If you don't invest in a residential house before filing your ITR, you must deposit the unutilized amount in a Capital Gains Account Scheme (CGAS).
You must use the CGAS amount within 3 years for house construction.
What Should You Do?
If You Are Constructing a House
Deposit Rs 45 lakh in a CGAS account before the due date of filing your ITR.
Use this amount within 3 years for house construction to claim full tax exemption under Section 54F.
If You Are Not Constructing a House
The Rs 45 lakh will be taxed as LTCG, and you must pay 20% tax (after indexation benefits).
Consider other tax-saving options, like investing in bonds under Section 54EC (with a 5-year lock-in).
Final Insights
If you plan to construct a house, deposit the Rs 45 lakh in a CGAS account before filing ITR.
If you don’t use this amount within 3 years, it will be taxed as LTCG in the year of expiry.
If you don’t want to construct a house, be ready to pay LTCG tax or invest in 54EC bonds for tax saving.

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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