I am 28 years old. My monthly income is Rs 45,000, while my wife earns Rs 15,000. We live with my parents . Our monthly household expenses are Rs 30,000, shared by me and my father. I have a monthly surplus of Rs 30,000. My wife's income and my surplus are invested separately in bank deposits. The current value of these investments is Rs 5 lakh. We may use it when we buy a house. I have started investing Rs 1,000 a month each in 7 equity schemes and two gold funds.

I am planning to buy a house with a loan of Rs 20 lakh and my EMI will work out to Rs 22,000. My wife may work for one more year. Is purchasing a house a better mode of investment, than investing in equity mutual funds?

Should I continue the SIPs or should I shift? My current balance in the existing schemes is Rs 1 lakh.

I have recently bought a term insurance policy for Rs 50 lakh. I read that the foreign partner of the insurance company is likely to move out. Will this affect me?

I am planning to retire by 40-45. How much do I need to save considering my present expenses?

My monthly contribution towards EPF is Rs 2,500 and current balance is Rs 1 lakh. Post retirement, my father, aged 50, will stay with me since he doesn't get pension.

I have parked Rs 30,000 in PPF. I have made investments in two unit linked plans and a single premium policy for Rs 30,000 each. There is also one endowment policy (LIC Jeevan Anand) which entails an annual premium of Rs. 25,000, with sum insured of Rs 5 lakh.

— Harsh Biyani

In this column we often highlight the need to take retirement call long before quitting

But retirement planning is no child's play. So you need to be more realistic in your approach.

When you take a home loan in the early part of your work-life, a sizable portion of your monthly income would be spent on meeting liabilities.

Besides meeting liabilities, you may have other goals to fulfil.

Your working life is shorter than the retired phase. So, leading a comfortable life without adequate corpus is next to impossible given the high rates of inflation.

If you wish to retire at 45, with a life expectancy of 80, you should have a corpus of Rs 3.3 crore and it should earn inflation adjusted return of one per cent to meet your annual living costs of Rs 3.6 lakh. To reach the target, you should save monthly, a sum of Rs 50,570 for the next 204 months and it should earn a return of 12 per cent. If you wish to retire at 50 you need to save Rs 26,064, after taking into account your EPF balance as well.

For an early retirement you may have to sacrifice other goals. Once you have children, the monthly expenses are likely to increase, reducing your surplus.

Buying house

Investment return on residential property will be 3.5-4 per cent at best. But capital appreciation over the years has the potential to increase the rental yield. Buying a house is not a bad idea since the property is a family asset.

If you had done an SIP in the Sensex for the past 29 years, the compounded annualised return would be 16.7 per cent. Equity is an essential ingredient in any portfolio.

Insurance

You will generally not be affected by stake or management changes. What you should rather worry about is your current cover, which is quite low. You need to buy a term insurance policy for another Rs 70 lakh. As part of diversification buy from more than one insurer.

Mutual Fund

Diversification is necessary, but too many funds in the portfolio may not serve the purpose. Instead of 7 schemes, consolidate with HDFC Top 200 and ICICI Pru Discovery. Since you are willing to take risk, continue your Reliance Banking. Book profits when you make abnormal gains.

Tracking error on Gold funds is currently low; once the current SIP tenure is over, continue with only one scheme.

>sureshpartha@thehindu.co.in

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