I m 54 yrs old working as a medical officer in ayush department. Getting a salary of 1.5 lacs per month. Around 50 lakh in fd
8.5 lacs in mf with sip of 5thousands per month.
Only son studying 1btech in cse in a pvt college
Fees abut 8lacs per annum.
What shall i fo for a 5lac income during my retirement at 62.
Please suggest.
Ans: You are 54 years old and a medical officer in the AYUSH department. Your salary is Rs. 1.5 lakhs per month. You have Rs. 50 lakhs in fixed deposits (FDs) and Rs. 8.5 lakhs in mutual funds (MFs). You invest Rs. 5,000 per month in a SIP. Your only son is studying B.Tech in CSE at a private college, with annual fees of Rs. 8 lakhs. You aim to have an annual income of Rs. 5 lakhs during retirement at 62.
Evaluating Your Investment Portfolio
Fixed Deposits
FDs are secure but offer lower returns. Over time, inflation erodes their value. Consider reallocating some FDs to higher-yield investments.
Mutual Funds
Your current MF investment is Rs. 8.5 lakhs, with a SIP of Rs. 5,000 per month. Continue with this SIP and consider increasing it to boost your corpus.
Steps to Achieve Rs. 5 Lakh Annual Income
Increase SIP Contributions
Enhance your monthly SIP contributions. Consider increasing it by Rs. 10,000-15,000 per month. This will significantly boost your MF corpus by the time you retire.
Diversify Your Portfolio
Diversification reduces risk and improves returns. Allocate funds to various MF categories like large-cap, mid-cap, and balanced funds. Actively managed funds can potentially offer higher returns compared to index funds.
Systematic Withdrawal Plan (SWP)
Post-retirement, use an SWP to generate regular income. An SWP allows you to withdraw a fixed amount monthly from your MF investments. This ensures a steady income and keeps your corpus invested.
Calculating the Required Corpus
To generate Rs. 5 lakhs annually, calculate the required corpus based on a conservative withdrawal rate of 4-5%. This ensures your corpus lasts longer. For Rs. 5 lakhs annually, you need a corpus of approximately Rs. 1 crore to Rs. 1.25 crore.
Using Indexation for Tax Efficiency
If you invest in debt funds, use indexation benefits to reduce tax liabilities. Indexation adjusts the purchase price for inflation, reducing taxable gains.
Avoid Direct Funds and Annuities
Direct funds might seem cost-effective but lack professional guidance. Invest through a Certified Financial Planner (CFP) to benefit from expert advice. Avoid annuities as they offer lower returns and less flexibility.
Education Loan for Son’s Fees
Consider taking an education loan for your son's fees. This can help in managing cash flow and availing tax benefits on interest payments.
Monitoring and Rebalancing
Regularly monitor your investments. Rebalance your portfolio to stay aligned with your goals. Adjust your investments based on market conditions and personal needs.
Benefits of Consulting a CFP
A CFP can provide tailored advice. They can help in selecting the right funds and planning for your retirement. Their expertise ensures informed decisions and better financial outcomes.
Final Insights
Increase SIP Contributions: Boost your SIP by Rs. 10,000-15,000 per month.
Diversify Investments: Allocate funds across various mutual fund categories.
Use SWP: Ensure regular income post-retirement through an SWP.
Corpus Requirement: Aim for a corpus of Rs. 1 crore to Rs. 1.25 crore.
Indexation Benefits: Use indexation for tax efficiency on debt funds.
Consult a CFP: Benefit from professional guidance for optimal investment decisions.
Following these steps will help you achieve your goal of Rs. 5 lakhs annual income during retirement.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
