Your Financial Plan

I am 35 and my wife is a home-maker. We have two daughters — a six-year-old and a baby . I own a factory. A few years back, I had a knee-replacement surgery. Due to the nature of my employment, I don’t think I can work beyond 45. My fear is saving for my later years. Please suggest the best options to meet my goals — my children’s education and marriage. My total life cover is ₹7 lakh.

Shankar

For the past three years, despite mobility challenges , you have been buying investment-linked products and not any protection plan. In your insurance plans, the rider offering waiver of premium is missing. You should have bought a term insurance plan for protection.For returns you could have gone for even plain vanilla recurring deposits. The only consolation is that your ULIPs have delivered decent returns.

Since you anticipate your working life to be short, you should have opted for products that offer higher returns such as mutual funds.

Funds to meet goals: Your income may not be sufficient to save for all the goals within the next ten years. For providing good education and planning for your retirement, besides setting aside sums for medical emergency, you may need to work longer.

Assuming the present cost for your elder daughter’s education to be ₹4 lakh, it will be ₹9 lakh after 12 years if inflation is at 7 per cent (same inflation considered for all goals). To reach the target, you ought to save ₹2,820 monthly for the next 12 years and it should deliver 12 per cent returns.

For her marriage, assuming a conservative figure of ₹15 lakh including gold, it will become ₹50.7 lakh after 18 years. To accumulate this amount, you need to save ₹6,700 monthly. For your newborn’s goal, the present value of ₹4 lakh will be ₹13.5 lakh after 18 years. To reach the target you need to save monthly a sum of ₹1800 for the next 18 years.

The present marriage expenses of ₹15 lakh will be ₹76 lakh when she turns 24. To accumulate this, you need to save ₹7700 a month. Considering present household expenses to be ₹20,000, the same will be ₹77,400 by the time you turn 55. To receive such an income at retirement you should have a corpus of ₹2.04 crore and it should earn inflation-adjusted return of one per cent.

To reach the target, you ought to save ₹20,670 monthly. So to attain all the goals you need to save a sum of ₹39,700 every month including your present savings. In this situation, we suggest you work till you turn 55.

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