Planning whiz


Geojit’s Investment Analyst, Gibin John helps a middle aged couple asses their retirement planning. He also suggests a suitable retirement plan to cover the shortfall.

My name is Prabhakar. I am 49 years old and my wife is 47 years old. We have two sons, and both are working. We are working in     private firms and earning an average monthly net income of Rs. 2,00,000. Our monthly      expenses are around Rs. 50,000. We are     planning to retire within five years. My biggest worry is whether the amount that we have   accumulated until now would be sufficient to meet the post retirement expenses. Our  investments include  fixed deposit of Rs. 70 lakhs, savings account balance of Rs. 10 lakhs, our residential house which is valued at Rs. 1 crore approximately. We have one   apartment worth Rs. 40 lakhs and we have rented it for Rs. 12,000 per month.

We have already accomplished all our major life goals. Now, we want to know whether our existing savings are enough to meet the expenses during the retirement period. The expected post retirement cost of living is  Rs. 50,000 per month. Please check our  existing financial position and advice a suitable retirement plan.

Gibin John, a certified financial planner replies:

Most people start planning for retirement very late. Main reason is they never realize the need for planning for retirement at an early age and another reason is that they give priority to realizing of family goals, and    meanwhile they forget about their post-retirement life. So, by the time  they are done with their family  responsibilities, it gets too late to start planning for retirement. In your case, you have at least made some focused investments towards retirement and we will help you review these investments and suggest further investment options if necessary.

Retirement is equally important as other goals since after retirement it is difficult to continue work and earn money for maintaining the same standard of living as during the working period. In the working years, one can achieve goals by depending on loans or financial assistance from other sources. But post retirement, these facilities may not be there since it would be difficult to repay the obligations. So, everybody should give priority for the retirement goal as well.

You are expecting a monthly expense of Rs. 50,000 per month post retirement. For getting this amount adjusted for inflation of 6% per annum, you need to create a   corpus of Rs. 1.90 crore. Considering the rental income of Rs. 17,000 (inflated at 6% p.a.) during retirement  period the required corpus will come down to Rs. 1.70 crore.

Currently you have a balance of Rs. 10 lakhs in savings account. From this amount you should set aside a    minimum of Rs. 3 lakhs for emergency requirements. You are left with a balance of Rs. 70 lakhs which will not be sufficient to meet the post retirement expenses. If this fixed deposit fetches an average return of 5.5% until retirement this amount will become Rs. 96 lakhs.  For overcoming the shortfall, you may invest Rs. 79,000 every month in equity oriented mutual fund until        retirement. The amount of Rs. 96 lakhs will be sufficient to meet the expense until your age of 68 so we suggest                 equity-oriented investment for creating additional retirement corpus. From the surplus balance of  Rs. 70,000 you may invest 60% in equity and 40% in debt or fixed return investment for creating wealth. You may use some amount from this for foreign trip before or after retirement.

Your sons have started their career. It would be prudent if they prepare a financial plan and start investing right from the early stages of their career.

Another important point to remember is to have  adequate health insurance.  If you do not have one, we suggest you take a family floater health insurance with coverage of at least Rs. 15 lakhs. This will protect your investments from depletion due to unexpected medical expenses.


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