I am 42, working as an ‘off the roles' employee in a non-banking finance company. I get a fixed consultancy fees of Rs 20,000 a month. Besides that, my annual incentives amount to an additional Rs 6 lakh.

I live in my own house. My monthly household expenses are Rs 30,000, including provision for insurance premium of Rs 8,700 and travel costs of Rs 4,000.

My dependants are my wife (aged 39), parents (75 and 68). My parents are covered by medical insurance of Rs 2 lakh each. My wife and I are covered by a floater policy for Rs 10 lakh. I have a term insurance for Rs 25 lakh, and also an endowment policy for Rs 10 lakh which matures in 2020.The annual premium is Rs 20,000.

Investment details:

KVP certificates worth Rs 3 lakh will mature in 2014.

My PPF balance is Rs 6 lakh. I am planning to invest Rs 2 lakh a year in both of our names for the next 10 years. I have plots which are collectively worth about Rs 21 lakh.

My current MF investments are Rs 4 lakh and I am planning to start fresh SIP for Rs 20,000 towards my retirement corpus.

I also have a ULIP (pension) with annual premium of Rs 50,000.

My savings account balance is Rs 2 lakh.

Goals:

An overseas trip in 2017 today costs Rs 4 lakh. In five years, I wish to buy a car with present value of Rs 10 lakh. I wish to support my brother's son's education in 2022, the present cost of which is Rs 2 lakh. Since I am in a stressful sales job, I wish to retire in 2022 and maintain the same standard of life till 80.

— Vinayaka Bhandarkar

Planning for retirement entails a judicious allocation of financial resources. In most cases, individuals simply set aside money to meet the living costs without factoring in inflation. It is mandatory to beat inflation for you to sustain with your retirement kitty.

If you wishe to hang your boots well before you turn 60, you should have a large corpus or alternatively your investment returns should beat inflation.

In your case since you are going to work only for ten more years, to reach all your goals you need to prioritise goals according to their timeline.

If you wish to retain the same standard of living, at retirement you need a corpus of Rs 1.05 crore. It is important that the kitty earns a return that is at least 1 per cent over and above the inflation to sustain till your life expectancy.

If you allow your existing investments to grow till your retirement, you can accumulate Rs 40 lakh. To meet the shortfall you ought to save monthly a sum of Rs 27,500 and the portfolio should earn a return of 12 per cent.

Given your limited surplus currently, start your retirement savings with Rs 10,000 a month. Once you meet all your goals, you need to save Rs 4.6 lakh a year from 2017 and it should earn tax adjusted return of 9.3 per cent. Construct a portfolio with 57 per cent allocated to equity investments and 43 per cent in debt. Your equity portion should earn 10 per cent and the debt part should earn tax adjusted return of 8.5 per cent. With this strategy, you can reach the target of Rs 1.06 crore.

Buying a car

It is difficult to predict the value of a car in five years, since it is generally not directly related to inflation. If we presume that the price will go up by 7 per cent every year, after five years the value will be Rs 14 lakh. To reach the target, you need to save Rs 17,150 and it should earn 12 per cent.

Since you are employed ‘off roles', buy a car by taking a loan and deduct the interest paid from your income for tax purposes till you reach the target.

Foreign tour

After five years, the Rs 4 lakh required for an overseas trip could become Rs 5.6 lakh. To reach the target, invest monthly a sum of Rs 6,850 and it should earn return of 12 per cent.

Education

Since it is a long-term goal, save monthly a sum of Rs 1,700 in an equity-oriented mutual fund. If you reach your required target of Rs 4 lakh earlier, shift the entire savings to debt.

Investment strategy

Barring retirement, for the rest of the goals allocate 70 per cent of the assets in equity and rest in debt. For retirement, moderately tone down equity exposure. The MF schemes you hold in your portfolio are good. Therefore, continue the same schemes for future investments too. If you live longer , dilute plots to meet your needs. When aged parents are around it is good to hold cash but don't keep too much of it in SB accounts.

>sureshpartha@thehindu.co.in

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