Gopalan, 54, plans to return to India in the next 3-5 years and wants to assess how to fund his retirement. His wife, Geetha , aged 51, desires a comfortable life, upon retiring, in India.

His daughter, married recently, is settled in Bengaluru. Gopalan and his wife are keen to spend time with family and friends, after having lived in the Gulf for the last 20-plus years.

His financial goals are as follows:

1.      To settle in Chennai or Bengaluru in a new flat. Estimated cost, including interior and other miscellaneous ones, would be ₹1.5 crore.

2.      To set aside health fund of ₹50 lakh as he is not sure of getting health insurance in India due to his health issues

3.      Living expenses estimated to be ₹1 lakh per month. Based on family history, they envisage a life expectancy of age 85 for both

4.      Gifting to relatives at the time of retirement, likely to be around ₹10 lakh-

5.      Travel expenses at ₹1 lakh per annum for 10 years from retirement

6.      Car purchase for ₹15 lakh at retirement

7.      Annual gift of ₹1.5 lakh to daughter

As they were used to spending liberally, the couple wanted to set aside some money for luxury spends at the time of retirement. They were not able to quantify the need but showed inclination to provide a limit so that they can stick to that.

Gopalan gets total rental income of ₹60,000 per month and likely to receive the same amount till his return to India. He was keen to save ₹1.25 lakh per month for the next 4 years and likely to return to India as his contract gets over by 4 years. He did not have much experience in investing in volatile assets. He had redeemed ₹20 lakh from his mutual funds for his daughter’s marriage. He was not comfortable with the volatility he faced during Covid market fall. His risk profile was assessed as conservative. He can allot maximum 15-20 per cent to equity for his long-term needs to manage inflation.

Review and recommendations

 Gopalan had the habit of saving regularly in fixed deposits and moving it to buy real estate in India. He was using low-cost loans in his country of stay to buy real estate properties.

We advised him to make a compromise in one of his goals: retirement spending or retirement home. If he chooses to buy a home worth ₹1.5 crore and maintains an expense of ₹1 lakh per month, he may not be able to reach both goals. He agreed to scale down the value of his retirement home.

 He will be able to generate ₹67 lakh to ₹70 lakh in the next 48 months by saving ₹1.25 lakh conservatively.

He needs to have ₹3.73 crore as his retirement corpus when he retires at age 58 for a current monthly expense of ₹1 lakh (Assumption - Life Expectancy 85 for both, Inflation 6 per cent per annum, investment return post tax after retirement is expected to be 7.5 per cent per annum). If he retains one property and gets rental income of ₹15,000 per month and assuming an average growth rate of 2-5 per cent on rental income, his required retirement corpus will come down to ₹3.5 crore -3.6 crore.

 He approached a builder and opted for joint property development of his independent home in Chennai, which will help him to get a home for his use and one for rental income of ₹15,000 per month. He decided to sell all his properties over a period of time except Bengaluru property. This will fetch him a corpus of ₹2.05 crore pretax. He would have accumulated ₹70 lakh in the best case scenario from his regular savings. This will give a total corpus of ₹2.75 crore. This will help him to get monthly income of ₹75,000. He will also have ₹30,000 per month as rental income adjusted for inflation from Bengaluru property and new property in Chennai.

 His savings from rental income for the next four years till he consolidates all his properties, ₹15-20 lakh, to be used for his car purchase and gifting needs.

 His current financial assets will help him to maintain a health corpus of ₹15 lakh. We advised him to opt for ₹25 lakh super top-up health cover along with base cover of ₹5 lakh-.

 His travel needs and gifting to daughter every year will have deficits. He needed to increase his savings by cutting down his expenses now or he can manage his expenses post retirement to include these expenses as part of total living expenses. He may receive around ₹10 lakh as end-of-service benefit from his current employer at the time of retirement. This can ease the funding for both these goals.

We observed that his plan does not have enough corpus to manage higher inflations for a few years, post his retirement. If he survives longer than expected, he may not have sufficient funds to manage the same lifestyle. Prudent spending and not increasing lifestyle would help people in the long run. As they have chosen to increase lifestyle expenses during working life and did not focus much on right savings and investments, they have to settle for a few compromises post retirement. Nevertheless, it was a very good effort by Gopalan to build this kind of net worth within his comfort zone.

The writer, Co-founder of Chamomile Investment Consultants in Chennai, is an investment advisor registered with SEBI