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Ramalingam

Ramalingam Kalirajan  |5173 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 16, 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 - Apr 16, 2024Hindi
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My wife and i are 39 years old. We have 2 daughters ages 6 and 9. We currently have the following: 1. 4.5 crore in stocks and equity MF 2. 7 lac each in NPS. We contribute 50K each yearly 3. We put 1.5 Lac for each child in SSY. 4. One apartment worth 1.2 crore with rent coming in at 40K per month 5. One house paid for where we stay. 6. When we retire we will sell the land we own amd that corpus will be invested. Present value is 4 crore. Our SIP are around 1.50 L a month and total expenses includinf SIP is 5 lacs a month. We want to allocate 50L of todays money for each child wedding and same for post schooling education. We also want to allocate 1 domestic vacation per year and 1 international hpliday every 12 or 18 months. If we want to retire at 40 or 45 what is the corpus needed to maintain same lifestyle?

Ans: Given your assets and goals, you're on a good path. To retire by 40-45 with the same lifestyle, you'll need a substantial corpus, likely multiple crores, depending on inflation and returns. Allocate 50L each for your children's education and weddings, which seems adequate. Ensure your investments align with your retirement and children's goals to achieve financial independence early.
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  |5173 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

Money
Hi I am 57yrs and will retire in June 24. That is when i turn 58 yrs from pvt sector no pension .Family of three my self wife and unmarried daughter 27 yrs but working in good MNC with decent salary of 1lac + but as of now not contrbuting financially and she is very independent and high in personal exp like travelling etc and 2 dogs as we are pet lovers. My question how should i allocate my corpus to live a decent life with 1.25lacs exp per month or max 18lacs per year. Which includes 2 family vacations a year not exceeding 4-5lac fo next 8-10 yrs Break up of my current corpus Bank FD -20lacs (@7.25%) Equity Direct (Through PMS) 1cr MF equity -2.10cr(Various Funds) MF Debt -69lacs ULIP -54lacs (lock in period over premium fully paid) NPS accmulation -12lacs (but only can withdraw after attening age of 60 so only) One House (apartments in Metro City) car loan 8lacs ( as i had change the previous car which was 12 yrs old last yr) No other Debt. One Major Future Exp - Daughter Marriage in next 3 yrs. Health Insurance coverd since 10 yrs Self-15 lacs, wife 10lacs , Daughter 5lacs.
Ans: Congratulations on your impending retirement! Planning for your financial future is crucial, especially with your family's needs and aspirations in mind. Let's strategize on how to allocate your corpus to sustain your desired lifestyle post-retirement.
Given your monthly expenses of 1.25 lakhs and considering future commitments such as your daughter's marriage, it's essential to optimize your existing assets to generate sustainable income streams.
Starting with your current corpus:
• Bank FD: While fixed deposits provide stability, the returns may not suffice to meet your long-term financial goals. Consider reallocating a portion towards investments with higher growth potential.
• Equity Investments: Your equity holdings, both direct and through mutual funds, offer the potential for capital appreciation. However, ensure a diversified portfolio and periodically review your investments to manage risk effectively.
• MF Debt and ULIP: These provide stability and security to your portfolio. Review the performance and liquidity of your debt investments to align with your retirement timeline and income needs.
• NPS Accumulation: Although you can't withdraw until age 60, NPS offers tax benefits and long-term growth potential. Continue contributing if feasible, considering it as a part of your retirement corpus.
• Real Estate: Your house can serve as a valuable asset, providing rental income or potential capital gains upon sale. Evaluate its contribution to your retirement income and consider diversifying if necessary.
Considering your daughter's financial independence and your retirement goals, aim for a balanced allocation across asset classes, focusing on generating regular income to meet your expenses.
• Equity: Maintain a portion in equities for long-term growth potential, but ensure it's aligned with your risk tolerance and retirement timeline.
• Debt: Allocate a significant portion to debt instruments for stability and income generation. Consider debt mutual funds or other fixed-income instruments to optimize returns.
• Emergency Fund: Set aside a portion of your corpus as an emergency fund to cover unexpected expenses and maintain liquidity.
• Retirement Corpus: Calculate the amount required to generate 1.25 lakhs per month, considering inflation and future expenses like your daughter's marriage. Adjust your asset allocation accordingly to ensure sustainability.
• Insurance: Review your health insurance coverage to ensure it's adequate for your family's needs, especially during retirement.
• Daughter's Marriage: Start planning and setting aside funds for your daughter's marriage, considering your financial resources and future income needs.
Advantages of MFs over ULIPs:
• Lower Cost: MFs typically have lower expense ratios compared to ULIPs. ULIPs involve insurance charges which eat into your returns. MFs focus solely on investment, potentially leading to higher returns in the long run.
• Transparency: MFs provide clear investment objectives, portfolio holdings, and expense structures. You know exactly what you're invested in and the fees involved. ULIPs can be more complex with hidden charges and a mix of insurance and investment components.
• Flexibility: MFs offer a wide variety of schemes catering to different risk appetites and investment goals. You can easily switch between funds or redeem your investment partially or fully (except for lock-in periods in ELSS). ULIPs often have lock-in periods and limited investment options.
Advantages of MFs over PMS:
• Affordability: MFs have a lower investment minimum compared to PMS. This makes them accessible to a broader range of investors. PMS typically require a much larger initial investment.
• Diversification: MFs inherently pool your money with other investors, providing built-in diversification across various assets. This helps spread risk and potentially improve returns. PMS require a larger investment to achieve similar diversification, which might not be feasible for everyone.
• Professional Management: MFs are managed by experienced fund managers who research and make investment decisions on your behalf. While PMS also offer professional management, they come with a higher cost.
Here are some additional points to consider:
• ULIPs: They can be a good option if you seek life insurance coverage along with investment potential. However, carefully assess the insurance charges and weigh them against the potential returns.
• PMS: If you're a high-net-worth investor seeking a customized investment portfolio and are comfortable with a higher fee structure, PMS could be an option. However, thoroughly understand the risks and suitability before investing.
Ultimately, the best choice depends on your individual financial goals, risk tolerance, and investment horizon. Carefully consider your needs before making a decision.
Regularly review and rebalance your portfolio to adapt to changing market conditions and life events. Seeking advice from a Certified Financial Planner can provide personalized guidance tailored to your retirement goals and financial situation.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |5173 Answers  |Ask -

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

Asked by Anonymous - Mar 30, 2024Hindi
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My wife and i are 39 years of age and wish to retire at 40 years. We have two daughters ages 10 and 6 years of age in school. We want to retire at 40 years. At 40 years we will have a corpus of around 13 crores of which 2 crores in stocks and 3 in Mutual funds and 5 crores we will get from our business sale at that time. How do we plan this to get 4 lacs a month in 2024 money and deploy it to last our life span? We rent at the moment and our rental is 60K per month which will go up by 5% yearly Thank You
Ans: To retire at 40 with a corpus of 13 crores and generate 4 lacs a month in 2024 money, here's a potential plan:

Corpus Allocation:

Stocks (2 crores): Consider keeping a portion in dividend-paying stocks for regular income and growth potential.
Mutual Funds (3 crores): Opt for a mix of equity and debt funds to balance growth and stability.
Business Sale Proceeds (5 crores): Invest in a diversified portfolio to ensure steady income and capital preservation.
Withdrawal Strategy:

Initially, withdraw 4 lacs per month from the corpus and adjust annually for inflation (assumed at 5%).
Use a systematic withdrawal plan (SWP) from mutual funds and dividends from stocks for regular income.
Investment Strategy:

Equity (40%): Invest in blue-chip stocks and large-cap mutual funds for growth.
Debt (40%): Invest in fixed income instruments like bonds, FDs, and debt mutual funds for stability.
Real Estate (20%): Consider investing in REITs or rental properties for rental income and capital appreciation.
Rental Increase:

Adjust the withdrawal amount annually to account for the 5% increase in rental expenses.
Emergency Fund:

Maintain an emergency fund equivalent to 6-12 months of expenses to cover unexpected expenses.
Healthcare and Insurance:

Ensure you have adequate health insurance coverage and consider a top-up plan or critical illness cover.
Review and update your insurance policies to protect your family and assets.
Review and Adjust:

Periodically review your portfolio's performance and adjust investments as needed.
Rebalance the portfolio annually to maintain the desired asset allocation.
Tax Planning:

Optimize your tax liabilities by utilizing tax-efficient investment strategies and instruments like tax-saving mutual funds and bonds.
Consult a Financial Advisor:

Consult with a certified financial planner or advisor to create a detailed retirement plan tailored to your needs and goals.
Consider seeking professional advice to ensure your retirement plan is robust and sustainable.
Stay Informed and Educated:

Stay updated with financial news and market trends to make informed investment decisions.
Continuously educate yourself about retirement planning and investment strategies to manage your finances effectively.
Remember, early retirement requires meticulous planning, disciplined saving, and prudent investing. With careful planning and execution, you can achieve your goal of retiring at 40 and enjoy a comfortable and financially secure retirement.

..Read more

Ramalingam

Ramalingam Kalirajan  |5173 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 19, 2024

Asked by Anonymous - Jun 10, 2024Hindi
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Hi, My age is 43yrs and current investments are PF and PPF: 1.5cr, Mutual funds: 90Lakhs, Direct Stocks: 25lakhs, Fixed deposits: 40 lakh, SGB: 5 lakhs, Cash:40 Lakhs. Liabilities: Home EMI: 49,000 per month, kids education: 45,000 per month and other expense:45,000. Surplus of 1 lakh. I like to retire in 10 years. How much corpus do I need at the time of retirement. Liabilities: 2 Kids will complete 12the class in 6 years And then their marriage.
Ans: You are 43 years old with diverse investments. You aim to retire in 10 years. Your financial details are as follows:

Provident Fund (PF) and Public Provident Fund (PPF): Rs. 1.5 crore
Mutual Funds: Rs. 90 lakh
Direct Stocks: Rs. 25 lakh
Fixed Deposits (FDs): Rs. 40 lakh
Sovereign Gold Bonds (SGB): Rs. 5 lakh
Cash: Rs. 40 lakh
Liabilities and Expenses
Home EMI: Rs. 49,000 per month
Kids’ Education: Rs. 45,000 per month
Other Expenses: Rs. 45,000 per month
Total Monthly Expenses: Rs. 1,39,000
Surplus Income: Rs. 1 lakh per month
Your children will complete their 12th grade in 6 years and then have expenses for higher education and marriage.

Assessing Retirement Corpus Needs
1. Estimate Monthly Expenses Post-Retirement:

Assuming you maintain a similar lifestyle post-retirement.
Inflation-adjusted monthly expenses might increase.
Consider an inflation rate of 6% per year.
2. Calculate Retirement Corpus:

Calculate the amount needed to generate the required monthly income.
Factor in inflation and life expectancy (e.g., up to age 85).
Investment Strategy
1. Pay Off Liabilities:

Prioritize paying off the home loan before retirement.
This will reduce your monthly expenses significantly.
2. Build a Diversified Portfolio:

Continue with diversified investments in mutual funds, stocks, and bonds.
Consider increasing investments in mutual funds for growth.
Allocate a portion of your surplus to equity and debt funds.
3. Set Up Systematic Investment Plans (SIPs):

Use your monthly surplus of Rs. 1 lakh to set up SIPs.
Focus on equity mutual funds for higher long-term returns.
Consider balanced funds for a mix of growth and stability.
4. Emergency Fund:

Maintain an emergency fund to cover 6-12 months of expenses.
Keep this in a liquid and safe investment like a savings account or short-term FD.
5. Child Education and Marriage Fund:

Start a dedicated fund for your children’s education and marriage.
Use a mix of equity and debt mutual funds for this goal.
Adjust the allocation as you get closer to the need.
6. Review and Adjust Investments:

Review your portfolio every six months.
Adjust based on performance and changing needs.
Ensure you are on track to meet your retirement and other financial goals.
Retirement Corpus Calculation
1. Estimate Future Monthly Expenses:

Current monthly expenses: Rs. 1,39,000
Adjusted for inflation over 10 years (at 6% per year).
2. Calculate Required Corpus:

Use a retirement calculator to estimate the corpus.
Factor in life expectancy, inflation, and expected returns on investments.
Additional Tips
1. Tax Efficiency:

Choose investments that offer tax benefits.
Consider tax-efficient mutual funds and debt instruments.
2. Adequate Insurance:

Ensure you have sufficient health and life insurance.
Review your policies to ensure they meet your needs.
3. Regular Monitoring:

Stay disciplined with your investments.
Regularly monitor and rebalance your portfolio.
Final Insights
To retire comfortably in 10 years, you need a substantial corpus. Continue your diversified investment strategy, focus on growth, and pay off your liabilities. Use your monthly surplus wisely to build a robust retirement fund. Regularly review and adjust your investments to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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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