I am 44 and work at a Government school. My wife, aged 42, works at a private sector company. Our daughter is in class nine and our son in class four.
I live with my parents in their house. They are financially independent.
I plan to retire at 55 and my pension will be Rs 25,000 with variable D.A.
I want my children to pursue the commerce stream and complete courses in the field of finance. My monthly surplus is Rs 3,000.
- T. P. Bhola
The basic mantra for early retirement is that one should save early to gain from the power of compounding. Even though you may get a pension, it may not be enough. You may still have to save for retirement to meet your monthly needs.
Although you save Rs 3.74 lakh annually and have a monthly surplus of Rs 3,000, you would still need Rs 21,000 more to reach all your goals.
Given your limited surplus, you need to either step up your savings or postpone your retirement.
If you retire at 55, to manage your household expenses you need at least Rs 59,000 if inflation averages 7 per cent. Considering your pension of Rs 25,000, your monthly shortfall will be Rs 34,000.
To meet the target you need Rs 1.05 crore at retirement and it should earn at least one percentage point over and above inflation.
Your retirement investments in GPF and PPF and also your potential savings in these avenues in future will enable you to reach Rs 60 lakh, if they continue to earn 8.5 per cent till you turn 55.
To meet the shortfall you ought to save monthly, a sum of Rs 19,800 till you retire.
If your wife continues to work till she turns 58, then your shortfall will come down substantially.
For your daughter’s education, earmark the mutual fund lump-sum investments. If the current accumulation delivers 15 per cent over the next six years, the fund value at the time of your daughter’s higher education will be Rs 16.2 lakh. To meet the shortfall, partly sell the SIP accumulation.
For her marriage expenses, you ought to save monthly, a sum of Rs 10,370 for the next 9 years. Earmark the entire SIP savings for both the goals pertaining to your daughter. There may be a marginal shortfall since you are withdrawing for education.
For your son’s education, earmark the ULIP proceeds and if it earns 10 per cent returns, at 2024, the fund value will be Rs 11.9 lakh. To meet the shortfall, invest monthly, a sum of Rs 2,925 for the next 11 years. With this, your current surplus will get exhausted.
For your son’s marriage, you need to save monthly, a sum of Rs 2,000 to reach the target.
Once your income increases, save for other goals.
(The author is CEO, myassetsconsolidation.com)
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