I am 36 and work for a private firm. My wife is 26. We have a son aged five. We stay with my parents. My monthly surplus is ₹8,000. I park ₹80,000 a year in PPF and the current balance is ₹3.5 lakh. I have invested ₹3 lakh in Kisan Vikas Patra.

My employer provides group medical coverage for my family for ₹5 lakh. I wish to save ₹15 lakh for my son’s marriage and build a corpus for my retirement. Can I invest in the new pension system (NPS)?

Angshuman

As long as your father manages the household expenses, the outflow from your income will be moderate. So, instead of investing conservatively, you can take higher risk to meet all the goals within the next 10 years. To do that, stop daily trade in equities which has already burnt a hole in your pocket. Instead, build a long-term portfolio through direct investment in equity or mutual funds.

Going by your asset allocation, 94 per cent of your savings are directed to debt and only 5 per cent is in equity mutual funds.

Such a portfolio will hardly beat inflation and will lure you into betting on equity trading. Since you are open to taking risk, build a portfolio with 60 per cent in equity, 30 per cent in debt and the rest in gold.

Education: To reach a target of ₹15 lakh in 13 years, you need to save ₹4,030 every month and that should earn a return of 12 per cent. Earmark a part of the savings in mutual funds for this goal. Your portfolio is mainly large-cap focused. Opt for funds with a multi-cap tilt.

Retirement: For retirement, NPS is a better option compared to the existing pension plans offered by insurance companies.

Your monthly household expense is assumed to be ₹15,000 . After 24 years, at an inflation rate of 7 per cent, it will be ₹76,000. Since you will not receive pension, you should have a corpus of ₹2.01 crore and that should earn an inflation-adjusted return of 1 per cent to sustain you till you turn 85.

With the significant age difference between your wife and you, plan for a higher retirement corpus. If your current balance in EPF and your future contributions along with that of your employer’s earn 8.5 per cent, at retirement it will amount to ₹68 lakh. If you continue your insurance and PPF investments till retirement, you will accumulate ₹1.73 crore. To meet the shortfall, you need to save ₹1,450 per month till retirement.

If you take a slightly higher risk, you can meet the target earlier than planned.

Insurance: Buy term insurance for ₹50 lakh.

The writer is an investment advisor and founder myassetsconsolidation.com Send your queries to >fp@thehindu.co.in

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