I am 40 and working in an MNC. My wife is a home maker. We have a son who is studying in class four. I own an apartment and had sold all my investments for the pre-closure of my home loan.

I am in good health and our family history is also good. Please suggest investment avenues to meet all my goals.

My retirement age is 58. At retirement, I will need the equivalent of ₹75,000 in present value.

- Prasanna

Currently, your monthly expense is ₹25,000. You may add another ₹5,000 towards medicines or treatment of age-related medical conditions. So a realistic target would be ₹30,000 every month in present value for your retirement. But building a corpus that would generate the equivalent of ₹ 75,000 is too much of an overestimation. At retirement, you will have to allocate more to debt funds and that itself will meet your emergency needs.

The present value of ₹75,000 will be ₹2.5 lakh by the time you turn 58, if inflated at 7 per cent. To have such an income when you retire, you should have a corpus of ₹6.04 crore. So it is better to be reasonable while planning for retirement. If not, you will end up taking on high-risk investments, which may be quite challenging to monitor .

Son’s education: To accumulate a corpus of ₹25 lakh in eight years, you have to save ₹15,630 every month and it should earn 12 per cent returns. Since you already have experience in making equity investments, construct a portfolio in the ratio of 60:30:10 in equity, debt and gold respectively. With such a portfolio, you can expect to achieve 12 per cent returns. Since your other goals are long-term in nature, follow the same asset allocation pattern.

Son’s marriage: With your current surplus, it is not possible to save for the goal. As your income increases, start saving for this goal. If you start saving in, say, 2017 for this goal, you must invest ₹9400 every month for a period of 13 years.

Retirement: The value of ₹30,000 will be ₹1.01 lakh after 18 years, if inflated at 7 per cent. To earn such an income upon your retirement, you should have a corpus of Rs 2.41 crore and this amount should earn at least one per cent return above the then prevailing inflation rate. If your current balance in EPF and future savings earn 8.5 per cent returns, your corpus will be Rs 15.9 lakh. The maturity proceeds of the insurance policies that you hold will be Rs 3.85 lakh. To meet the short fall you need to save Rs 29,270 every month.

Insurance: The current life cover that you have is inadequate to protect all your goals. We suggest you buy a term cover online for Rs 1.1 crore.

The writer is a financial planner and founder of myassetsconsolidation.com. Send your queries to fp@thehindu.co.in

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