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I am 32 and work in an IT firm. My wife, 27, is a homemaker. We have two daughters, the elder one is two . My parents are financially independent. We all live together. My employer provides medical cover of ₹5 lakh each for my parents and my family. I have a term insurance cover for ₹1 crore. Is it enough?

Chandrasekar R

You can take more risk when you are young; your current equity allocation of 34 per cent is too low for your age. Given that inflation is 9-10 per cent and you are in the 20 per cent tax bracket, recurring deposit is not the best investment vehicle. Hence, construct a well-balanced portfolio.

To save ₹25 lakh in 16 years, for your elder daughter’s education, invest ₹4,570 every month across asset classes to earn at least 11.5 per cent every year. Construct a portfolio with asset allocation of 55:35:10 in equity, debt and gold. Follow the same asset allocation strategy for your second daughter and invest ₹3,500 every month over 18 years. If you are able to mop up the required corpus early, shift the entire corpus to debt.

The marriage expenses of ₹25 lakh indicated do not seem very realistic. If we discount ₹25 lakh at 7 per cent (inflation assumption), the present value works out to ₹5.6 lakh, which seems inadequate. Similarly, if you are budgeting ₹25 lakh today, adjusting for inflation, the corpus at the end of 22 years will be ₹88.6 lakh. For this, you need to invest ₹7,500 every month. For your younger daughter you need to save ₹6,700 every month to have ₹1 crore, 24 years from now. Your monthly expense at retirement will be ₹1.33 lakh. For this you need a corpus of ₹2.9 crore, earning 1 per cent more than inflation to sustain until your wife turns 80. Save ₹14,200 every month, including your EPF. Increase your term cover by ₹50 lakh. The current health cover is sufficient for you but for your parents buy a super top-up plan for ₹5 lakh.