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I am 37 and work for a private firm. My wife is a homemaker. We have a son aged five. We live in my parent’s house, though they live independently with a pension of ₹4,000. My monthly expenses tend to match my income.
For my son’s education my parents save ₹48,000 every year by investing in two different insurance policies. They also support me during emergencies. With spiralling inflation, how do I plan for my future and build a corpus for my retirement? My parents may leave behind some money after their time . I have no health policies.
Kuntal Guha
You must try to augment your regular income by looking at other part-time avenues. This will improve your monthly surplus. Unless your income increases, you cannot realise any other goal till your son completes his education and goes for employment.
Education: It is good to note that your parents are helping with your son’s education needs. Although insurance policies can provide some safe returns, they are not good avenues to build long-term wealth.
If you are averse to investing in equity, take a term insurance and invest in PPF to obtain better risk cover and higher return on your investments. The maturity proceeds of your endowment policy will be ₹7.52 lakh if the insurer continues to declare the same levels of bonus.
If your unit linked plan is able to generate 10 per cent returns, the maturity value will be ₹3.26 lakh.
Meeting your son’s graduation expenses will not be an issue. If he is keen on a master’s degree, he can take an education loan.
Retirement: To maintain your present standard of living after retirement, at 58 you should have a corpus of ₹1.12 crore and it should earn a bit more than inflation.
To beat inflation you need to take some risks at least. Otherwise, you will need a bigger corpus to meet your needs till you turn 80.
The present EPF balance and your future contributions will give you a corpus of ₹14.9 lakh, if interest rate is 8.5 per cent. You will thus have a huge short fall in your retirement fund.
Even if your parents leave some money behind, it may not be sufficient. You will need to increase your monthly surplus as soon as possible.
Otherwise, after retirement you may have to be financially dependent on your son. Take a health insurance policy for Rs1 lakh at least.
The writer is a financial planners and founder myassetsconsolidation.com
The writer is a financial planners and founder myassetsconsolidation.com
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