Vidya Bala, Co-Founder, PrimeInvestor.in:Invest in safe options that give around 7% return. Choose from the Senior Citizens’ Savings Scheme, RBI Floating Rate Bonds, and bank fixed deposits that you can lock in at this rate for five years or more. Considering her age, keep at least 10% of the corpus in a combination of savings bank account and short-term bank FDs so that it can be easily liquidated. This will also be necessary to pay taxes, apart from possible medical needs.
I am 40 years old and earn Rs 50,000 per month after tax. I want to retire after five years and start a business. I have around `30 lakh in fixed deposits. I also invest Rs 5,000 per month in mutual funds. I live in a self-owned house. How should I invest to earn `1 lakh per month to cover my living expenses after I retire?
Naveen Kukreja, CO-FOUNDER AND CEO, PAISABAZAAR.COM:You have not shared your portfolio, the estimated post-retirement benefits, and the amount required to start the business. Based on the information shared, it seems impossible to generate a post-retirement monthly income of Rs 1 lakh after five years. Moreover, starting a new business may involve a considerable gestation period before reaching a break-even point. Till then, your portfolio would have to sustain occasional capital infusion. So, you may have to rethink your early retirement plans and post-retirement living expenses. You must save at least 25% of your post-tax income for investment, and then estimate your postretirement expenses, after assuming an inflation rate of 6%. Also, ensure you have adequate insurance and an emergency fund for at least six months. Once you start your business, increase the emergency fund to cover at least 12 months’ expenses to make up for the lower income certainty associated with any business. Your existing fixed deposit portfolio can be used to create your emergency fund.
I am a 47-year-old banker. I have Rs 10 lakh in mutual funds (SIPs of Rs 15,000 since 2021) and equity (Rs 8.5 lakh). I also have a PPF corpus of Rs 20 lakh. I have property worth Rs 3 crore with outstanding liability of Rs 90 lakh. Please advise how I can clear my liability in the next 5-10 years to retire early. Should I increase my mutual fund SIPs?
Prableen Bajpai, Founder, FinFix Research and Analytics:
You have not provided details about your monthly income, expenses, EMI, health and life insurance. However, if we assume the current household expenditure of around Rs 40,000 per month, you’ll require a retirement corpus of nearly Rs 2.7 crore at the age of 60. This calculation considers 6% inflation, 11% and 6% as pre- and post-retirement returns, and retirement period of 25 years. Your financial assets are around Rs 30 lakh, which calls for focus on investing. At the same time, your huge loan liability cannot be ignored. While clearing debt is usually given precedence over investing, in your case, it would be better to balance the two because your current savings are low. If all the resources are used to repay the loan, you won’t have enough time to build sufficient retirement corpus. For instance, if a contribution of Rs 1.5 lakh is made annually, you will have a PPF corpus of up to `81 lakh in the next 13 years, while your current equity portfolio and SIP will grow to around Rs 91 lakh, assuming 11% returns. An additional SIP of Rs 28,000 a month will be needed reach the assumed target of Rs 2.7 crore. In addition, a buffer fund (equivalent to 12 months of expenses) should be built gradually. The response to your query is based on limited information and aimed at providing a broader structure. Consult a professional for comprehensive planning.
I am 33 years old and earn Rs 44,000 a month. I live in my own house and plan to have a child this year. I invest Rs 15,000 per month in flexi-cap, mid-cap and debt mutual funds, and Rs 5,000 in stocks. I also pay Rs 26,000 a year in life and health insurance. I want to retire at 60 with a decent corpus after securing my child’s needs. How should I proceed?
Dev Ashish, Founder, StableInvestor, and Sebi-registered investment adviser:
You are already saving Rs 20,000 a month across mutual funds and stocks. You might also have salary deductions towards the EPF. So, you maintain a fairly high savings rate and this bodes well for the future. Your two major goals are retirement and your (future) child’s higher education. Assuming you are planning higher education for your child that costs Rs 20 lakh today, in about 18 years, it will cost about Rs 94 lakh to Rs 1.12 crore, considering 9-10% inflation. If you invest monthly with 75:25 equity:debt allocation, you would need to start with Rs 11,000-13,500 per month and hike this by 5% every year. In case this isn’t possible, you can start smaller and raise it with an increase in your salary in the future. For retirement corpus calculations, details about PF and NPS, mutual fund corpus, and expenses after retirement are unavailable. Since you are already investing Rs 15,000 in mutual funds and another Rs 5,000 in equities, you can earmark the same for this. You can also channel any incentives you receive to this portfolio. If you have any surplus in your savings account or fixed deposit, set aside at least 6-9 months worth of expenses as an emergency fund.
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