The Hindu Business Line : I want to retire early…

With a long-term view, when the BSE Sensex was around 15,500, I had invested in large-cap equity funds to the tune of Rs 17 lakh in the following schemes: DSPML Top 100, HDFC Top 200, HSBC Equity, Sundaram BNP Paribas Select Focus and Kotak 30. I wish to know your comment on the investments. I am forty years old and planning to retire next year.

I wish to know how much corpus I need, assuming my life expectancy is 80. Currently, our expenses in Chennai is Rs 20,000 and my wife can work for another 22 years.

I would use my retirement corpus, after my wife retires from service. Based on her current earnings, she is eligible for pension at today’s value for Rs 8,000. We are planning to leave our two houses as estate to our daughter.

My wife is covered by group medical facility in her office and our entire family is covered by the same. I am a healthy person and I am not sure whether I need any additional cover.

Please suggest an asset allocation pattern from my monthly savings.

If I have surplus, after meeting my daughter’s education and marriage expenses, which is the best investment avenue?

If I wish to write a Will, is it possible to change at a later date?

If I sell the land, how will the capital gains be calculated?

The solutions

Retirement plan

Going by your current savings, in another fifteen months, you may end up with close to Rs 22.50 lakh. Since your wife plans to work until retirement — up to 2030, you can plan your investment with a long-term perspective.

Out of this corpus, you can invest Rs 20 lakh towards your retirement and balance in a flexible deposit and allow it to grow. Invest in different asset classes, i.e debt, equity, mutual fund, gold and real estate. If your investment is allowed to grow at 8 per cent per annum, your retirement kitty will be Rs 1.08 crore in 2030.

If you can maintain the same standard of living, the current monthly expenses of Rs 20,000, inflated for the next 22 years at 6 per cent, would come to Rs 72,000 per month.

Assuming, post-retirement, your wife is eligible for a pension of Rs 28,000, if you can mange a return of 2 per cent adjusted for inflation, you and your wife can have a comfortable retirement life, provided you are not increasing your standard of living.

However, if you wish to improve your life style post retirement, you should try to earn at least 10 per cent return on your savings of Rs 20 lakh, then your corpus at 2030 will be Rs 1.83 crore.

Irrespective of your wife enjoying a group medical coverage, it is advisable for both of you to take a medical insurance, at least a few years before your wife retires.

Given the higher life expectancy for females, it is better to plan the retirement corpus till your wife reaches the age of 80.

Estate Planning

If you decide to utilise the plot for the education and marriage of your daughter, it is advisable to sell one-half for the education and the rest based on the requirement towards marriage.

Post education, if your daughter earns and accumulates money, then you can leave the balance portion of the plot as estate to your daughter.

Alternatively, instead of investing in real estate (as suggested by us for diversification) for the purpose of your retirement corpus, you can directly invest in debt or equity and utilise the same for your daughter’s marriage.

If this is sufficient for the marriage, then the unsold portion of the plot, you now own, can be sold closer to your wife’s retirement.

Capital gains on the sale of property will be 10 per cent without indexation and 20 per cent with indexation. If your income is below the minimum tax slab (since you both would have retired), where the tax is nil, it can be adjusted against the capital gains.

Will

You can write a Will on your movable and immovable assets. At a later date, if you write another Will, the new one would supersede the previous Will. In India it not mandatory to register the Will and even a handwritten Will is valid.

Mutual Fund

Your investment pattern in mutual fund reflects your risk appetite.

Since all your investment are in large cap funds, the downside risk is relatively less, when compared with mid- and small-cap funds.

For your retirement kitty, you can consider investing in global funds as part of diversification.

Investment of Rs 17 lakh, already made by you, has not been considered for the purpose of calculating your retirement corpus. You can build this corpus and use it on the medical front, over and above your medical cover.

If you and your wife outlive your expectations, use the money as a buffer.

For all your investments, ensure that a nominee is added. When you are making bulk investments, it is advisable to stagger the investment over a period of time.

Queries can be sent to financialplanning@thehindu.co.in

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