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Is increasing SIP by 1.4 L per month a good idea for early retirement at 56?

Ramalingam

Ramalingam Kalirajan  |9854 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 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 - Jun 19, 2024Hindi
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I am currently 51 and willing to retire at 56.current sips done is 1.33L per month.Started investing in June 2021 and so far invested value is 58 L and market value seen as 77 L..Now i am thinking to increase SIP by additinal 1.4 L per month so will it be good to increase sips for next 5 years .Pl advise.

Ans: Current Investment Analysis
You are investing Rs. 1.33 lakhs per month in SIPs. Since June 2021, your investment of Rs. 58 lakhs has grown to Rs. 77 lakhs. This shows good growth in your portfolio.

Increasing SIPs
You plan to increase your SIPs by Rs. 1.4 lakhs per month for the next 5 years. This will significantly boost your investment corpus. Regular investments in diversified funds can yield good returns over time.

Evaluating Investment Strategy
Increasing SIPs is a good strategy. Ensure you diversify across large cap, midcap, and small cap funds. Actively managed funds can offer better returns than index funds.

Balancing Risk and Returns
As you are nearing retirement, balance your portfolio to manage risk. Consider allocating a portion to debt funds for stability. This ensures safety and steady returns.

Planning for Retirement
With increased SIPs, your retirement corpus will grow substantially. Review your portfolio regularly. Adjust based on market conditions and financial goals.

Insurance and Emergency Fund
Ensure you have adequate life and health insurance. Maintain an emergency fund covering 6-12 months of expenses. This provides financial security for unforeseen events.

Final Insights
Increasing your SIPs by Rs. 1.4 lakhs per month is a good strategy. Ensure diversification and balance risk. Regular reviews and adjustments will help you achieve your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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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Asked by Anonymous - Mar 01, 2024Hindi
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I am 47 yrs old , had been investing in SIP since last 13 yrs . I started with 5 k , increase the sip every alternate year by 5k , so currently doing around 50k per month. My XIRR is around 19 % presently since 2010. I have portfolio value of 1.3 Cr. I have 2 daughters age 15 and 5 , need 3-4 cr for higher education and marriage for both. Need 5 Cr for my retirement at 60 . Will I achieve my goal or I need a higher increase in sip amount. Though I have planned retirement at 60 , I am a super specialist doctor , can comfortably make 3-4 L in a month even after I retire from Govt service.
Ans: Thank you for sharing your detailed financial journey and future goals. You've made impressive strides in your investments, and your dedication is commendable. Let’s analyze your current situation and provide a pathway to achieving your financial goals.

Current Financial Situation
1. Investment History
You have been investing in SIPs for 13 years, starting with Rs. 5,000 and increasing your SIP amount by Rs. 5,000 every alternate year. Currently, you are investing Rs. 50,000 per month.

2. Portfolio Value
Your portfolio value has grown to Rs. 1.3 crores with an XIRR of around 19% since 2010. This is a strong return on investment.

Financial Goals
1. Higher Education and Marriage for Daughters
You need Rs. 3-4 crores for the higher education and marriage of your two daughters, aged 15 and 5.

2. Retirement Corpus
You aim to accumulate Rs. 5 crores for your retirement by age 60. Although you plan to continue earning Rs. 3-4 lakhs per month post-retirement, having a substantial retirement corpus will provide financial security.

Projecting Future Growth
1. Assumptions
Current SIP Amount: Rs. 50,000 per month
Annual Increase in SIP: Assuming you continue to increase by Rs. 5,000 every alternate year
Expected Return: Continuing with a conservative estimate of 12% annual return on mutual funds (though your XIRR is higher)
Investment Horizon: 13 more years until retirement at age 60
2. Projected Corpus Calculation
Using these assumptions, let’s project the potential growth of your investments. Over the next 13 years, with continued SIP increases and a reasonable rate of return, your corpus can grow significantly.

Meeting Financial Goals
1. Higher Education and Marriage Costs
You need Rs. 3-4 crores for your daughters' higher education and marriage. By allocating part of your current and future investments specifically for these goals, you can ensure you meet these needs.

2. Retirement Corpus
Aiming for Rs. 5 crores for retirement, considering your current portfolio and future contributions, seems achievable. However, ensuring you increase your SIP amounts periodically and maintain a diversified portfolio is crucial.

Recommendations for Optimization
1. Increase SIP Contributions
Given your current financial capacity and goals, consider increasing your SIP amount more frequently or by a higher amount. Instead of Rs. 5,000 every alternate year, increasing annually or by a larger amount could help.

2. Review and Rebalance Portfolio
Regularly review and rebalance your portfolio to ensure it remains aligned with your financial goals. Replace underperforming funds with better-performing ones.

3. Focus on Quality Funds
Ensure that your investments are in high-quality mutual funds with a consistent track record. Avoid overlapping and concentrate on diversified and well-managed funds.

4. Emergency Fund and Insurance
Ensure you have an adequate emergency fund and sufficient insurance coverage. This provides financial security and protects your investments from unexpected events.

Consulting a Certified Financial Planner
1. Personalized Advice
A Certified Financial Planner (CFP) can provide personalized advice based on your unique financial situation, goals, and risk tolerance. This tailored approach can optimize your investment strategy.

2. Expert Management
A CFP continuously monitors your investments and makes necessary adjustments based on market conditions. This ensures your portfolio stays on track to meet your financial goals.

3. Risk Management
A CFP employs strategies to manage risk and optimize returns, helping you navigate market volatility and safeguard your investments.

Final Thoughts
You are on a strong path with your disciplined investment approach and impressive returns. To ensure you achieve your goals of Rs. 3-4 crores for your daughters' higher education and marriage, and Rs. 5 crores for your retirement, consider increasing your SIP contributions more aggressively and regularly reviewing your portfolio.

Consulting with a Certified Financial Planner can provide you with personalized advice and expert management to keep your investments on track. Your continued commitment to disciplined investing and strategic planning will help you achieve your financial aspirations.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

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