I am 40 years old and intend to retire at 48. We have no children. My salary is Rs 2 lakh a month. I also receive a performance bonus of Rs 10 lakh a year. My monthly expenses are Rs 1 lakh. I have no liability. I live in my own house. I also own another house that I intend to sell for Rs 40 lakh. I wish to invest the proceeds in mutual funds.
We have health cover for Rs 5 lakh each. We have no life insurance cover.
Post retirement, I expect my monthly expenses to be Rs 75,000 in present value. Based on our family health record, we may live up to 80.If I have Rs 4.5 crore at 2020, will that be sufficient?
My investments are as follows:
My current PF balance is Rs 20 lakh. My annual contribution along with that of my employer’s is Rs 3 lakh.
I have FDs for Rs 25 lakh. They will mature every subsequent month for the next few years. I am planning to use the proceeds to start SIPs in MFs.
I recently purchased perpetual bonds for Rs 11.3 lakh at 11.8 per cent. Should I hold this for the next 2-3 years? Will this be the right approach? I have bought gilt funds to the tune of Rs 5 lakh.
I have shares worth Rs 12.5 lakh, which I wish to sell and move to mutual funds.
In mutual funds, I have invested Rs 25.8 lakh and am planning to invest another Rs 37.5 lakh.
I contribute Rs 10,000 a month in a pension plan and its current value is Rs 9 lakh. If I encash one-third in 2021, how much annuity can I expect from this?
Am I under- or over-estimating my retirement corpus?
— Singh
When retired life is longer than the working life, it is always a challenge to build a corpus. If you retire in 2020, you should have a corpus of Rs 4.2 crore and it should earn an inflation adjusted return of one per cent. But you should decide your standard of living post retirement and your ability to outpace inflation will be a key factor in arriving at the right retirement kitty.
Going by your current savings your MF equity corpus will grow to be Rs 1.9 crore if your investment earns a return of 15 per cent. If the PF contribution continues to earn 8.5 per cent, you can reach a target of Rs 70 lakh.
If you continue your SIP investment of Rs 60,000 and if it earns a return of 12 per cent, in 2020 the corpus will be Rs 93 lakh. If you invest Rs 40 lakh from the sale of property, it makes the target easier to achieve. In your insurance pension schemes it may be prudent to expect a return of 6-7 per cent.
BONDS
Managing debt investment is more challenging than equity. It is always prudent to invest bonds in line with the tenure of the goal. Perpetual bonds need you to make market calls.
Fix your return target on gilt funds and book profits.
MUTUAL FUND
Further SIPs can be switched to other schemes if you are looking for aggressive returns.
FMCG funds have delivered outstanding returns, but it will be a challenge repeating it in future. Instead of going for fresh SIPs of Rs 35,000 each in FMCG and Pharma sectors, you can diversify your exposure.
INSURANCE
Take a term cover for Rs 2 crore.
(The author is CEO, MyAssetsConsolidation.com)
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