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At 49, with Rs. 1.5 lakhs salary, Rs. 15 Cr. property, can I retire at 55?

Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 25, 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 - Sep 25, 2024Hindi

Hi Sir, I am working as college lecturer with in hand salary of 1.5 lakhs per month. I am 49 years old. My husband has a salary of 2.5 lakhs in hand salary. we have real estate worth 15 Cr. which fetches rent of close to 2 lakhs per month. But the cash corpus is only about 50 lakhs. and my son is only 14, how much more do we need to accumulate to retire at 55. My husband is 50 now. Our yearly expenses including school fees and property tax and health insurance and term insurance is around 15 lakhs.

Ans: First, I appreciate your thoughtful approach towards retirement planning. You and your husband have a good combined monthly income and a significant real estate portfolio generating Rs 2 lakhs in rent.

However, I notice that the cash corpus is Rs 50 lakhs, which might be insufficient for future liquidity and investment needs. Your current expenses, including school fees, property tax, health insurance, and term insurance, total around Rs 15 lakhs annually. Let’s assess how much more you need to accumulate to retire at 55.

Retirement Goals and Key Factors to Consider
For effective retirement planning, it’s important to consider the following aspects:

Desired Retirement Age: You plan to retire at 55, giving you six more working years.
Annual Expenses in Retirement: Current expenses are Rs 15 lakhs annually. After retirement, education expenses may reduce, but healthcare and inflation may increase other expenses.
Inflation Factor: Consider that inflation will erode purchasing power, making future expenses higher than today.
Income from Rent: Rental income is Rs 2 lakhs per month, which adds Rs 24 lakhs annually to your post-retirement income.
Corpus Growth and Safety: The cash corpus of Rs 50 lakhs needs to grow, as it plays a critical role in your retirement strategy.
How Much More Do You Need to Accumulate?
Current Cash Flow and Shortfall
Annual expenses: Rs 15 lakhs
Current rental income: Rs 24 lakhs
Your rental income already exceeds your annual expenses by Rs 9 lakhs. This is a positive sign, as it can potentially cover your basic lifestyle costs in retirement.

However, there are additional considerations:

Inflation Impact: If we assume a 6-7% inflation rate, your Rs 15 lakh annual expenses today will grow in the next 5-10 years. You must account for this to ensure that your rental income continues to cover your expenses.
Healthcare Costs: Post-retirement healthcare can be significant, and it’s crucial to have a plan for that. Consider separate investments for future healthcare.
Investment for Long-term Financial Security
Although rental income will support most of your needs, your Rs 50 lakh cash corpus must be optimally invested to supplement your lifestyle and unexpected expenses. Relying solely on rental income may expose you to risks like tenant vacancies or property repairs.

Instead of keeping all the cash idle or in low-return avenues, it’s vital to build a diversified portfolio with:

Equity-based mutual funds: For long-term growth and inflation-beating returns.
Debt mutual funds or fixed income instruments: For stable returns and liquidity.
Health insurance and emergency fund: Ensure these are strong enough to cover unforeseen expenses.
Education Planning for Your Son
Your son is 14, and his education expenses (graduation and possibly post-graduation) will be a significant part of your financial planning in the next 5-10 years. You should create a dedicated fund to ensure you can meet these costs without impacting your retirement corpus.

Estimated Education Costs: Consider allocating separate funds for higher education to be prepared for rising education costs. Equity-based investments can help grow this education corpus over time.
Debt Management
You haven’t mentioned any liabilities other than the property. However, if there are any loans, prioritizing repayment of high-interest debts before retirement is critical. Entering retirement with minimal debt ensures a stress-free financial situation.

The Importance of Liquidity
Real estate is illiquid, and though it’s a major asset class for you, having more liquid assets like mutual funds and fixed-income investments is essential.

Building Liquidity: The Rs 50 lakh corpus should ideally be increased in the next 5 years through systematic investment. This will provide a safety net if there are any disruptions in rental income or increased expenses.
Is Your Retirement Corpus Sufficient?
Given that your rental income covers your current expenses, you already have a reliable source of income for retirement. However, real estate alone might not be enough to provide for unexpected expenses, healthcare, and lifestyle changes.

You should aim to build a retirement corpus that can sustain you comfortably even without relying solely on rental income. Here are a few key points:

Investment Growth: Grow your Rs 50 lakh cash corpus to around Rs 1.5-2 crores over the next 6 years. This will ensure you have a comfortable buffer.
Diversification: Ensure you diversify into actively managed mutual funds. Actively managed funds can outperform index funds and provide higher returns over time. Avoid keeping too much in low-return investments like FDs.
Final Insights
Focus on growing your current corpus through active investments in mutual funds.
Maintain liquidity in your portfolio to cover unexpected expenses.
Create a dedicated education fund for your son’s future needs.
Leverage your rental income, but ensure you have other investments for flexibility.
Avoid over-relying on real estate, as it may be difficult to liquidate when needed.
With proper planning and disciplined investment, you can comfortably retire at 55 without compromising your lifestyle.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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