I am a 69-year-old dentist and practise at my own clinic. My wife is 67. We may live for 10 more years. Our children are well-settled, but we do not wish to be dependent on them.
My income from my practice does not match my expenses. I may need some money for repair and maintenance of our house within the next 10 years.
How do I allocate funds in a safe way to generate good inflation-beating returns?
- John Joseph
If your monthly income is likely to fall over the next few years, there may be a huge shortfall in meeting all your expenses.
Your current monthly needs of Rs 40,000 multiplied by 120 months shows that you need at least Rs 48 lakh to maintain the same standard of living, ignoring inflation.
Unless you earn one percentage point over and above the rate of price rise and another one percentage point for tax related outflows, your corpus will get exhausted at 77, if inflation is 7 per cent.
Considering your age and your risk appetite, it may be good for you to stay invested only in debt instruments. When safety of investment is paramount returns will get moderated.
In such a case beating inflation rates year on year will be a challenge, more so after paying tax on the interest earned.
You should have a corpus of Rs 50 lakh to sustain your family till you turn 80. This amount can be raised only if you sell or reverse mortgage your property.
How long you continue to work will decide the extent of the shortfall. Since your children are settled abroad, sell your clinic once you stop practising. With that you can increase investments to meet the monthly needs. Besides, this amount may come handy to renovate your house.
We presume you would earn 9 per cent from your bank FDs.
If the interest rates are lower than 9 per cent, invest a portion in post office senior citizen scheme which offers a quarterly interest payout.
Split your fixed deposits across a few large-sized banks which would ensure higher safety.
Since both of you are senior citizens, you need to have some emergency funds ready. In the event of hospitalisation in a non-network hospital, your insurer will not entertain cashless facility and you would have to take the reimbursement option. In such a situation emergency funds will be useful in meeting unforeseen expenses.
MEDICAL COVER
Your current medical cover is low and must look to enhance it substantially, even if it costs you a bit more interms of premiums to be paid.
Some insurers offer co-payment facility in lieu of a lower premium rate.
Write a will in favour of your wife and she can in turn later bequeath your assets to your children.
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