Retirement is the most expensive goal and needs to be planned

Retirement is the most expensive goal and needs to be planned

Surya Bhatia Certified financial planner and principal consultant, Asset Managers

 

I am 39 years old and my wife and I have a post-tax income of `80,000 per month. We pay a total annual premium of `1,18,759, which includes life insurance of `15 lakh for me and `8 lakh for my wife. We also have a family health plan which includes my 10-year-old daughter and two-and-half- year-old son. I also contribute in Public Provident Fund (PPF).

My investment in the stock market is `3.5 lakh with a current loss of `50,000. But I can hold them for another five-sev- en years. I have also deposited `3 lakh in a one-time deposit in an LIC scheme and `38,000 in a unit-linked insurance plan of LIC, also a one-time investment scheme. Besides, I have a fixed deposit of `5 lakh. At present, I am living in my parental house.

I have never invested in a mutu- al fund or gold fund but would like to do so. After all these in- vestments, I am able to save `35,000 per month. I need `10 lakh for my daughter's higher education after seven years, `7 lakh after 14 years from now to meet some fixed expenses and `10 lakh after 15 years for my son's higher education, all in present value. Please help me manage my portfolio.

 

--Rajiv Bhardwaj Financial needs: The broad financial goals you have defined are providing for your children's education and some fixed expenses. While you are silent on planning for their marriage, you have also not mentioned your retirement need. It has been seen that it is often assumed that the need for retirement will be met either by the funds accumulated over a period of time and by the the retirement corpus you may get at that time. However, what many people don't realize is that this is the most expensive goal as this expense is not one-time and the difficult (or good) part is that you don't know when it will end. We have considered in your case the retirement need based on the data available and have taken the need as `30,000 per month when you retire at the age of 58 years. All the above needs will be classified under a trust where safety is given the highest priority.

Assumptions: Your monthly savings of `35,000 will grow annually at 8%. Inflation has been taken as 6% and the interest at 9%. The amount invested has been earmarked against the respective need and will be used for the said specified pur- pose. We have considered your existing investments of `12.08 lakh while drawing up your financial road map. But this figure doesn't capture the correct amount invested in PPF and `70,000 has been considered.

Watch out for: Existing investments in FDs can be partially invested in fixed maturity plans (FMPs) that are more tax efficient. Only a partial amount will be invested in FMPs and the balance can be kept in FDs for contingencies.