Hi Sir, my wife and I are working in the government sector. Both are 43 years old. We have a kid studying in the 5th Std. House-hold expenditure 40k per month. Monthly savings after all expenditure is 50K. We have a present NPS corpus of about 1.2 cr in total. The total NPS contribution is about 70K monthly. One house property is worth 45 Lakhs (present EMI 50k with 6 years loan term remaining). Another property is worth 70 Lakhs (present EMI 35K with 17-year loan term). A land property worth 35L at the current value. Child policies worth 30L sum assured (Approximately 60 Lakhs at maturity in about 15 years). LICs of about 60L on maturity in 5-6 years, and 40L on maturity in 15 years. The total insurance premium is about 40k monthly at present and will reduce to 20K after 5 years. FD of about 10L. Planning for early retirement in 5 years. How to plan the finances for a better retirement life?

Ans: You have already taken several good steps. With steady income, long-term investments, and assets in place, your financial base is strong. Now, with early retirement in mind, we need to look deeper and plan from all angles.

Let’s evaluate your financial situation and create a 360-degree view for a better retirement life.

? Current Age and Time Horizon

– Both of you are 43 years old.
– You plan to retire in the next 5 years.
– That means retirement starts at 48.
– You may live till age 85 or beyond.
– So, retirement will last around 35-40 years.

This is a long retirement period. You will need strong planning to sustain this journey. The focus must be on creating steady income and growth after retirement.

? Income, Savings and Expenditure

– Monthly income after all deductions is not directly stated.
– Your savings after household expenses is Rs 50,000/month.
– Household expenses are Rs 40,000/month.

This is a decent saving rate. But after retirement, you will lose your salary. So you must create a reliable income stream from your investments.

Also, inflation will increase your monthly expenses. That needs careful consideration.

? Loans and EMIs – Current Commitments

– You have two ongoing home loans.
– First EMI is Rs 50,000/month (6 years remaining).
– Second EMI is Rs 35,000/month (17 years remaining).

EMIs are Rs 85,000 in total. That’s a big part of your current cash flow.

To retire in 5 years, you must reduce or clear these EMIs. Otherwise, loan EMIs will eat into your retirement income.

Suggestion: Try to prepay the first home loan fully before retirement. If possible, reduce the second loan EMI using any lump sum proceeds. Don’t carry heavy EMIs into retirement.

? Real Estate Holdings

– First house is worth Rs 45 lakhs.
– Second house is worth Rs 70 lakhs.
– You also own a land parcel worth Rs 35 lakhs.

You have Rs 1.5 crore locked in property assets. But these are not liquid.

You may not get rental income matching market value. Property needs maintenance, carries taxes, and has low rental yield.

For retirement income, real estate is not efficient.

So, don’t plan to use real estate for monthly income. It can be backup. But not primary income.

If needed, you may consider selling one property after retirement to create liquidity. But keep this as Plan B only.

? NPS Contribution and Corpus

– Your combined NPS corpus is Rs 1.2 crore.
– Monthly contribution is Rs 70,000.

This is a good base for retirement. But you must remember:

– NPS has lock-in till age 60.
– On retirement, 60% can be withdrawn.
– Balance 40% must be used to buy annuity.

Annuity returns are low and taxable. So, don’t depend only on NPS for retirement income.

Also, NPS withdrawals are taxable. Plan redemptions carefully to save tax. Use a Certified Financial Planner to structure NPS withdrawal and reinvestment plan.

? Child Policy Investments

– Child insurance policies have total sum assured of Rs 30 lakhs.
– Expected maturity value is Rs 60 lakhs in 15 years.

These are insurance-cum-investment policies.

Such policies give low returns — mostly around 5% to 6%.

Since your child is still in 5th Standard, you have time.

You can consider surrendering low-performing policies. Reinvest the proceeds in mutual funds with the help of a trusted MFD and CFP.

Mutual funds offer:

– Better growth potential
– More transparency
– Flexibility to switch and redeem
– Goal-based investing

Insurance should not be used for investment. Only pure term insurance is needed for protection.

? LIC Policies – Need Evaluation

– You hold LIC plans worth Rs 60 lakhs maturing in 5-6 years.
– Another set maturing in 15 years worth Rs 40 lakhs.
– Monthly premium for all is around Rs 40,000.
– This will reduce to Rs 20,000 after 5 years.

This is a big monthly outgo.

These are most likely endowment or traditional plans. They offer returns in the range of 4% to 5.5%. That’s lower than inflation.

So, it is better to:

– Evaluate surrender value now.
– Exit poor-performing plans.
– Reinvest in mutual funds for better growth.
– Keep only term insurance for life cover.

You are paying Rs 40,000/month. That is Rs 4.8 lakh per year. Reinvesting this in equity mutual funds for 15+ years can create serious wealth.

Take this decision with the help of a Certified Financial Planner. Timing and tax impact must be checked.

? Fixed Deposit – Safe but Limited

– You have Rs 10 lakh in fixed deposits.

FDs are safe. But they give taxable returns around 6.5% to 7%. Inflation is close to that.

FDs are good only for emergency fund. Or short-term goals.

FD interest is not ideal for wealth creation. After retirement, you need higher growth.

So, don’t add more to FDs. Keep Rs 5 to 6 lakh for emergency use. Balance should move to better investment options.

? Monthly Savings – How to Use for Retirement Planning?

– You have Rs 50,000 monthly savings.
– But Rs 40,000 is going to LIC and child policies.

That leaves only Rs 10,000 for actual investing. You must fix this first.

Here’s the action plan:

– Stop new traditional LIC or ULIP policies.
– Surrender low-performing existing ones after review.
– Reduce EMI pressure if possible through prepayment.
– Re-channel Rs 40,000 of monthly premium to mutual funds.

Now, let us build your retirement strategy.

? Retirement Planning – What You Need to Do

– You have 5 years till retirement.
– After that, 35+ years of retired life.
– You must create growth and income both.

Here’s what to do:

Step 1 – Create a diversified mutual fund portfolio

– Allocate to equity mutual funds.
– Use large-cap, flexi-cap, and hybrid funds.
– Invest through regular plans with a trusted MFD and CFP.
– Avoid direct plans. They offer no support or guidance.
– Increase SIPs as premiums and EMIs reduce.

Step 2 – Prepare income generation plan for post-retirement

– Create a monthly withdrawal strategy from mutual funds.
– Combine equity and debt to balance growth and income.
– Keep at least 5 years’ worth of expenses in debt funds.
– Balance in equity funds for long-term growth.
– Avoid annuities – they lock your money and give low income.

Step 3 – Don’t use index funds

– Index funds have no downside protection.
– They cannot switch between sectors.
– Actively managed funds can adjust based on market cycles.
– That is safer in retirement years.

Step 4 – Don’t invest based on emotions

– Market may go up or down.
– Don’t stop SIPs or panic.
– Let a Certified Financial Planner guide you regularly.

? Child’s Higher Education and Marriage Planning

– Your child is in 5th standard.
– Graduation is 8-10 years away.
– Marriage is 15+ years away.

Start a dedicated SIP for child education. Don’t depend only on child plans. Mutual funds can beat inflation.

– Begin with Rs 10,000/month if possible.
– Increase annually.
– Use goal-based investing with a proper plan.

? Health Insurance – Must Be Reviewed

You didn’t mention your health insurance status. At this stage, you need:

– Rs 10 to 15 lakh cover per person.
– Separate personal plan apart from employer cover.
– Family floater for child and spouse.

Medical costs are rising fast. Cover yourself well.

Also, take critical illness cover if not already taken.

? Other Key Suggestions

– Create a will. That ensures proper transfer of assets.
– Keep nominations updated on all investments.
– Review portfolio yearly with your CFP.
– Don’t invest based on tips or trends.
– Don’t increase real estate exposure further.

? Finally – What You Should Do Now

– Evaluate all insurance-cum-investment policies. Exit poor ones.
– Reduce EMIs before retirement.
– Increase mutual fund investments monthly.
– Keep emergency fund of Rs 5 to 6 lakh only.
– Don’t rely on FDs or NPS alone.
– Build a strong mutual fund portfolio.
– Get help from a Certified Financial Planner.
– Structure post-retirement income smartly.
– Protect wealth with good insurance and a calm mind.

With the right plan, your early retirement can be peaceful and financially strong.

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