Hi, I am 42 years old Software Engineer. My Earnings are my monthly salary of 1.5 lakh/month and 25k/month rental income from my own house and 10k/month from dividends from Stocks. I have 5 dependents(Parents, Wife, Daughter(10 yrs) & Son(7 yrs). My monthly expenses are around 80,000 per month.
1) EPF – 30 Lakh
2) PPF – Maturing in 2028 with around 15 Lakh maturity amount.
3) ULIP – Maturing in 2027 with around 14 Lakh maturity amount.
4) LIC Endowment Policy – Maturing in 2027 with around 7 Lakh maturity amount.
5) Mutual Funds – Invested 6.5 Lakh and Current value is around 10 Lakh.
6) Direct Stocks – Invested 33.5 Lakh and Current value is around 76 Lakh.
7) Have investments in SGB’s, NCD’s, BOND’s, CD’s of around 5 Lakh.
I am planning to retire in next 2- 3 years; do you see any impediments?. Can you provide any suggestions as I am not liking to work in IT field.
Ans: Current Financial Situation
Income and Expenses
Monthly Salary: Rs 1.5 lakhs
Rental Income: Rs 25,000
Dividends from Stocks: Rs 10,000
Total Monthly Income: Rs 1.85 lakhs
Monthly Expenses: Rs 80,000
Dependents
You support five dependents: parents, wife, daughter (10 years), and son (7 years). This means your financial planning should ensure their well-being.
Investments
EPF: Rs 30 lakhs
PPF: Rs 15 lakhs (maturing in 2028)
ULIP: Rs 14 lakhs (maturing in 2027)
LIC Endowment Policy: Rs 7 lakhs (maturing in 2027)
Mutual Funds: Invested Rs 6.5 lakhs, current value Rs 10 lakhs
Direct Stocks: Invested Rs 33.5 lakhs, current value Rs 76 lakhs
SGBs, NCDs, Bonds, CDs: Rs 5 lakhs
Financial Analysis
Assets and Maturities
You have significant investments maturing in the next few years. This includes your PPF, ULIP, and LIC Endowment Policy, totaling Rs 36 lakhs. Your direct stocks and mutual funds are also performing well.
Monthly Income vs. Expenses
Your current monthly income is Rs 1.85 lakhs, while your expenses are Rs 80,000. This leaves you with a monthly surplus of Rs 1.05 lakhs, which is a strong position.
Retirement Planning
You plan to retire in 2-3 years. Given your investments and income, this is feasible, but it requires careful planning to ensure long-term financial stability.
Recommendations
Diversify Investments
Mutual Funds:
Increase your investments in actively managed mutual funds. They offer higher returns and are managed by professionals.
Direct Stocks:
Continue investing in direct stocks, but diversify to reduce risk. Avoid putting too much in one sector or company.
Debt Instruments:
Consider more investments in debt instruments like SGBs, NCDs, and Bonds. They provide stable returns and lower risk.
Review Insurance Policies
ULIP and Endowment Policy:
These policies are set to mature soon. Once they mature, consider reinvesting the proceeds into higher-yielding options like mutual funds or debt instruments.
Additional Health Insurance:
Ensure you have adequate health insurance coverage for you and your dependents. Medical costs can be significant, especially post-retirement.
Emergency Fund
Maintain Liquidity:
Keep an emergency fund equivalent to at least 6 months of expenses. This should be in a liquid and accessible form, like a high-interest savings account or liquid mutual fund.
Future Education and Marriage of Children
Education Fund:
Start a dedicated education fund for your children. Consider child-specific mutual funds to ensure you have enough for their higher education.
Marriage Fund:
Plan for your children's marriages by investing in balanced or hybrid funds that offer a mix of equity and debt.
Retirement Corpus Growth
Systematic Withdrawal Plan (SWP):
Post-retirement, consider an SWP from your mutual funds to ensure a steady monthly income. It’s tax-efficient and offers better returns than traditional fixed deposits.
EPF and PPF:
Your EPF is already substantial and earning interest. Keep it until retirement to maximise returns. The PPF maturing in 2028 will also provide a lump sum that can be reinvested.
Final Insights
Your financial situation is strong, with a well-diversified portfolio and substantial assets. Focus on:
Reducing high-risk exposure and diversifying investments.
Planning for your children’s future needs.
Ensuring adequate insurance coverage.
Maintaining liquidity for emergencies.
Maximising retirement corpus growth through strategic investments.
Consult with a Certified Financial Planner for personalised advice. They can help you tailor your strategy to your specific needs and ensure a smooth transition into retirement.
Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
