Hi, I am 48 year old male working in a IT firm. I earn 1.3 L per month and my monthly expense is 70k per month. I have EPF of 45L, Nps of 22L, shares of 50L, fd of 80L. I also have additional residential property of about 40L. I have no loans. I would like to retire early in a year or two and would like to spend rest of life without any financial issue. Kindly advice.
Ans: Evaluating Your Financial Position
You earn Rs 1.3 lakh per month and have monthly expenses of Rs 70,000. Your current investments include:
EPF: Rs 45 lakh
NPS: Rs 22 lakh
Shares: Rs 50 lakh
FD: Rs 80 lakh
Residential Property: Rs 40 lakh
You plan to retire early in a year or two and want a secure financial future.
Monthly Expenses and Inflation
Your current monthly expenses are Rs 70,000. Considering inflation, this amount will increase over time. Plan for increasing expenses to ensure a comfortable lifestyle.
Evaluating Retirement Corpus
Your retirement corpus should be able to cover your expenses for the rest of your life. Let's analyze how your current investments can support you.
EPF and NPS
EPF and NPS are excellent for retirement as they provide regular income and tax benefits. However, their liquidity is limited until retirement age.
EPF: Consider keeping this until you reach the official retirement age for a stable income.
NPS: Provides regular annuity post-retirement. Continue investing till you retire.
Shares and FD
Your shares and FD can provide a mix of growth and stability.
Shares: These can offer good returns but are subject to market risks. Plan a strategy to withdraw gradually to mitigate risks.
FD: Provides stable returns. Consider laddering your FDs to have a continuous income stream.
Residential Property
You can either rent out or sell your additional property. Renting can provide a steady income, while selling can add to your corpus.
Building a Retirement Corpus
Calculate the amount needed for your retirement corpus to sustain your lifestyle.
Current Monthly Expenses: Rs 70,000
Annual Expenses: Rs 8.4 lakh (70,000 x 12)
Assuming you need this for the next 30 years, considering inflation and other factors, your corpus should be substantial.
Investing Post-Retirement
Once you retire, the goal is to ensure that your corpus generates a steady income.
Systematic Withdrawal Plan (SWP): Invest in mutual funds and set up an SWP to get regular monthly income.
Balanced Funds: Invest in balanced funds for a mix of equity and debt.
Debt Funds: Provide stability and can be used for short-term goals.
Emergency Fund
Keep an emergency fund equivalent to 6-12 months of expenses. This should be easily accessible, like in a savings account or liquid funds.
Health Insurance
Ensure you have comprehensive health insurance coverage. Medical expenses can be a significant burden, so having a robust plan is crucial.
Regular Review
Regularly review and adjust your investments to match your needs and market conditions. A Certified Financial Planner can help you with this.
Final Insights
To retire comfortably, ensure a mix of growth and stability in your investments. Maintain liquidity for emergencies and healthcare. Plan for inflation and increasing expenses. Regularly review your investments to stay aligned with your goals.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
