Planning whiz- Planning for early retirement


I am a 30-year-old Central Government employee. I joined the service in November 2016. At present, my salary after deductions is  Rs. 54,000 per month. My employment is under NPS. My wife is a research staff and her consolidated salary is Rs. 45,000 per month. Our monthly expense is Rs. 40,000. My idea is to build a corpus of Rs. 1.5 crore, before I become 47 years old. The main reason for accumulating the money is for travelling and buying a new house (not mandatory) and to save something for child’s future, who is studying in LKG. I would like to retire from the service at the age of 47 and I expect to get Rs. 50,000 rupees with today’s value as pension. My risk appetite is medium.

My investments are as given below:

1. NPS – Rs.10,000 (it will increase during salary hike every year)

2. Mutual Fund SIP of Rs. 8,000 (started Since July 2019)

3. Insurances – Rs. 14,750 (for 6 years), sum assured is Rs. 8 lakh

4. Fixed Deposit Rs. 8,00,000

5. Last month I started a Recurring Deposit of Rs. 8000/month

6. Five cents land

I would like to know if I need to make any changes to my current investments.

Gibin John, a certified financial planner replies:

You have decided to prepare a financial plan at the right age. I understand that your current age is 30 and you had started your career just five years back. If you start disciplined investment from now, then you can achieve your dreams easily. As you have a government job, you do not have to worry about job security or payment. What you need to focus on now is how to invest the money to achieve your goals like vacation, buying a house and your child’s higher education.

Your monthly salary is Rs. 54,000 and your wife’s income is Rs. 45,000. Total monthly income of your family is Rs. 99,000. After deducting the living expenses of Rs. 40,000, the surplus is Rs. 59,000. This amount you can utilize for investments. Currently, you are investing Rs. 8000 in mutual fund SIP and Rs. 8,000 in recurring deposit. You are also paying Rs. 14,750 per annum as insurance premium. But these investments are not sufficient to meet your goals.

Coming to your retirement, as you are planning to retire at the age of 47, you have 17 years in your career.  You mentioned that you are expecting Rs. 50,000 per month as pension after retirement. Your current living expense is Rs. 40000. If we considered minimum inflation of 4.5%, the living expense of Rs.40,000 will become Rs.84,535 at the time of retirement and you will require a corpus of Rs, 2.70 crore to meet this expense. After considering the monthly pension amount, the net corpus amount will become Rs1.90 crore. For accumulating this amount in next 17 years you must invest Rs. 37,000 per month in equity oriented mutual fund.

The above figure of Rs.1.90 crore was not a part of your query, but we included it since it is indispensable and more important and a necessity than travel or buying a house.

Now, coming to your plan to create an amount of Rs1.50 crore at the time of retirement for the life goals of travelling, buying a house and kid’s education, to reach this figure, you need to invest Rs. 29,500 per month in equity oriented mutual fund.

The surplus amount after investing for your retirement is Rs.22,000. There will be a shortage of Rs 7,500 for accumulation the required corpus. That you can manage by increasing the investment based on salary increment and you may allocate Rs 6 lakh from fixed deposit towards this purpose.

The Fixed Deposit of Rs 3 lakhs can be considered as a reserve to meet any contingency. The RD will act as a portfolio balancing investment and should be continued all through.

You have not shared the details of your all investments. If you do not have sufficient investments to meet the financial requirement of your family in your absence then you should take term insurance of Rs. 1.5 crore. As your organisation is taking care of your health cover, you need not worry about it.

We wish you a successful financial life.


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