I am 52, self-employed and my wife is a homemaker. Our son is pursuing higher studies abroad and I am supporting his family currently.

My savings are in FDs so that I can avail myself of overdraft. I may sell my business when I am 65.

I am selling a plot in Hyderabad; should I buy a retirement home or another house with the proceeds?

Gajapathy

To reduce tax on the ₹20-lakh profit from your plot sale , you can consider buying a retirement home as it will help you save on long-term capital gains tax. But maintaining a retirement home is expensive. Maintenance cost for a high-end home is ₹4 per sq ft which, if inflated at 5 per cent annually, will be ₹7.2 per sq ft by the time you retire. The maintenance cost will be in addition to your living expense. You have a surplus, so this may not be a problem. You can also choose to rent out the retirement home until you occupy it, helping to pay for the maintenance costs.

Also, your monthly outgo may reduce once your son is employed. Assuming a monthly expense of ₹20,000 for you and your wife now and an inflation of 7 per cent per annum, you will need ₹48,000 every month once you retire.

For this, you’ll need a corpus of ₹75 lakh earning 1 per cent more than inflation to sustain till you turn 80. Even if you are unable to sell the business, you can still lead a comfortable life with your deposits and other income. Since you plan to work for 10 more years, you can park a portion of your surplus in equity mutual funds.

Mutual Funds can deliver better post-tax returns for you.

(The writer is financial planner and founder of Myassetsconsolidation.com. Send your queries to blinefp@gmail.com)

(The writer is financial planner and founder of Myassetsconsolidation.com Send your queries to blinefp@gmail.com )

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