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I am 55 years old and my employer does not provide pension post-retirement. My monthly expenses are Rs 25,000 and my annual income is Rs 7 lakh.
I have invested Rs 52 lakh as follows: In direct equity - Rs 23.5 lakh, Rs 5.2 lakh in mutual fund, Rs 6 lakh in fixed deposits, Rs 9 lakh in gold and the rest in PPF and EPF. I have two residential plots worth Rs 50 lakh. I live in my own house.
I have taken a health cover for Rs 6 lakh.
My goals are:
I want to provide Rs 15 lakh for our daughter’s marriage and set aside Rs 25 lakh to set up a clinic for her.
My wife and I wish to go for a few foreign tours over the next few years, for which I need Rs 10 lakh.
When I retire I may receive a few lakh rupees as benefits. We expect to live till 80. How much do I need to save for retirement? If my retirement corpus is inadequate, shall I sell one plot and construct a house.
— Geeta Pathi
It is not prudent to invest limited surplus to build a house close to your retirement. In general, residential rental yields are less than 4 per cent. But in your case, since you have purchased the plots quite some time ago, you may have better yields. To construct a 1,000 sq ft house, you may need Rs 15 lakh and it may help you to earn a return of 8 per cent. It will still not be enough for your needs.
Based on your current annual living expenses, at retirement your need a corpus of Rs 77 lakh and it should earn an inflation adjusted return of 1 per cent to sustain till you turn 80. If you construct and rent out your house for Rs 10,000, then you need a corpus of Rs 54 lakh to meet your household expenses. For your daughter’s clinic use your direct equity proceeds. If you wish to fulfil your daughter’s goals, you will be left with only Rs 12 lakh.
In such a situation, construction is not an ideal choice. Sell plots separately as you exhaust your retirement corpus. This strategy will help you enjoy any appreciation on your land.
At a later stage in your life, go for reverse mortgage of your property to support your needs till both you and your wife live.
Foreign tours
For the next few years, accumulate your surplus and ensure that you clock 10 per cent returns. If you save monthly, a sum of Rs 20,000 for the next 3 years you will accumulate Rs 8.3 lakh. For the balance, utilise your final settlement proceeds.
Mail your queries to >fp@thehindu.co.in
(The author is CEO, myassetsconsolidation.com)
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