I am 49 years old and work in a public sector company. I will be retiring in August 2022. My wife is a home maker, aged 44 .We have two daughters. The older one 20 and is in the third year of her engineering course, while the younger is in her first year intermediate.

I purchased a flat in 1999 and am paying an EMI of Rs 5, 323 and the loan period ends in August 2012. I took a car loan from the company, paying an EMI of Rs 1, 334 a month which will continue till May 2013.

I am paying a premium of Rs 10,600 for term insurance annually (towards insurance to the flat). I have an endowment policy that matures in 2018 and the amount would be Rs 3.6 lakh plus accrued bonus.

My take home salary at present is Rs 40,000 after deducting taxes and EMIs on loans, including a PF refundable Loan. The PF loan will be paid off by November 2012.

My living expenses are about Rs 30,000-35,000.

I also get perks or bonus once a quarter and it totals to Rs 2.6 lakh a year. This amount is being used for my daughter's college fees, to pay instalments for my plot purchased at Bangalore and for paying the premiums towards Jeevan Anand Pension policy. The total cost of the plot is Rs 10 lakh. I have debt investments in post-office schemes and some FDs, and have parked some amount in MFs.

My concerns are

I require Rs 10 lakh for my younger daughter's engineering education in 2013 including possibly a capitation fee.

How do I meet my elder daughter's marriage expenses of Rs 18 lakh in 2014-2015 and second daughter's marriage expenses of Rs 25 lakh in 2019?

Assuming that my wife and I live till 80, will my savings in EPF and Jeevan Anand life insurance policy( I will receive maturity proceeds of Rs 3 lakh per annum from 65-75) meet my monthly needs of Rs 25,000 in present value. In this policy I have accident cover for Rs 27 lakh. Is it worth continuing the policy?

I am thinking of purchasing a second-hand three bedroom flat for Rs 38-42 lakh. Is it advisable at this stage of my life? If so how can I have to manage the loan?

A G Rajakumar

Real estate as an asset is held by many beyond what is required. With just 10 years left for retirement it is better to stay off any further exposure to this asset class . But if you wish to move to a bigger house, consider selling your existing flat. Take a loan or withdraw from EPF, but not beyond Rs 5-7 lakh. For instance, for a loan of Rs 7 lakh, at 10.75 per cent, your EMI works out to Rs 9,544 for a 10 year loan, which can eat into your surplus.

You may have misunderstood the benefits of Jeevan Anand policy . Jeevan Anand is an endowment cum whole life policy andnot a pension plan. Besides , the maximum accident cover allowed in the policy is Rs 5 lakh. You would end up paying premiums for four years post retirement. Since it has not completed three years, you cannot surrender the policy. But even if you surrender after three years you may get only 30 per cent of the premium paid excluding the first year premium. Continue the policy for a few more years and take a call on surrendering it.

Education: The goal being a short term one, utilise your debt investments in post office and your FD. Sell your direct equity portion to meet the needs of the first year. For the rest of the course earmark your perks and bonus.

Marriage: Continue your investments in mutual fund SIPs, along with Gold ETF for another three years. If the MF portion manages to earn 12 per cent for and 10 per cent is achieved by Gold ETFs, along with your existing MF portfolio half the marriage needs can be met. For the rest, withdraw Rs 9 lakh from the PF accumulation. For your younger daughter's marriage, if your real estate plot investment appreciates by eight per cent for the next eight years, that will take care of 70 per cent of the requirement. To meet the shortfall you need to save a sum of Rs 5,360 for the next 84 months and it should earn a return of 12 per cent. If your real estate investment is not appreciating as predicted, use the maturity proceeds of the endowment policy to meet the shortfall.

Retirement: With monthly contribution of Rs 15,500 and Rs 7,459 from your employer, along with your current balance, at retirement your EPF corpus will be Rs 1.38 crore. This if the interest rate continues to be 8.5 per cent. If you add other benefits such as gratuity and leave encashment, your corpus will increase by another Rs 20 lakh. This corpus will take care of your needs till you turn 85.

For an annual living cost of Rs 3 lakh, at an inflation of 7 per cent, if you retirement corpus manages to earn one per cent over and above inflation, it will be comfortable. If there is a short fall in return projection maturity benefit of the Jeevan Anand can be used as back up and major part of it you can leave it as estate to your daughters. To protect your retirement corpus, take a health cover for Rs 5 lakh four years before retirement to cover any pre-existing ailments. To protect all your goals, take term insurance for Rs 75 lakh if you are going to continue with Jeevan Anand. Else increase the cover by another Rs 25 lakh.

(This article was published on January 21, 2012)
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