Bonjour, new guests from small-town India
Puneet Dhawan of Accor is brimming with ideas on ways to revive the hospitality sector
Recently, we got the opportunity to prepare a financial plan for ‘P’, 54, who is looking to retire by 59. His family members are his wife ‘A’, 50, and twin daughters, 24.
His goals are listed below:
His assets and cash flows are listed in the tables.
During discussions, P revealed that he had twice lost his job during his career and that affected his savings.
He struggled during those phases for regular monthly expenses.
This experience made him stick to a moderate lifestyle and risk-averse savings for a long period. He wants to be doubly assured of having enough money for his post-retirement phase.
His wife wants to visit historic places in India. As they had been spending money for the kids’ education, house purchase and other expenses so far, she wants to have a simple but fulfilling life post P’s retirement.
‘A’ has some knee-related health issues and P is obese for his age and not very healthy.
The following steps were recommended to the family:
They want to sell their land near Chennai and use the fund to buy a retirement home in Thanjavur. We advised them to invest the sale proceeds of the land towards retirement. P’s EPF is expected to fetch him ₹71.82 lakh when he retires, taking into account both his employer’s and his own contribution.
P was advised to invest ₹50,000 per month towards retirement for the next four years in large-cap equity mutual funds. P’s expected corpus from his MF portfolio is ₹39.55 lakh when he retires.
Along with an expected land sale value of ₹65.5 lakh on or before his retirement, he is expected to accumulate a corpus of about ₹1.77 crore. This corpus would aid him towards a decent retirement with monthly expenses of about ₹50,000 at age 59 (equivalent of current expenses of ₹38,000).
He can sell his Chennai house and buy a house in Thanjavur if he wants to relocate post-retirement. Generally, people are more comfortable in a place where they have lived for many years. Moving to other cities post-retirement is stressful due to various factors. They can decide this based on their daughters’ place of living, post their wedding.
P can invest ₹1.5 lakh per annum for the next four years in the Public Provident Fund (PPF). The PPF corpus expected at retirement, ₹30.84 lakh, needs to be maintained as a health fund to support any regular medical expenses such as doctor’s visits, prescription costs and support needs.
P and A will be able to undertake domestic travel till his retirement from his annual income. If they have to continue their travel plans post his retirement, they would need ₹15 lakh at retirement for 12 annual travels at a cost of ₹1.2 lakh per annum. With the current income and surplus, they will not be able to accumulate this corpus.
Hence, they were advised to restrict their travel expenses based on their annual rental income. P can save ₹3 lakh per annum and any additional amount possible for the next four years which could be used as a surplus fund post-retirement.
The writer is a SEBI-registered investment advisor at Chamomile Investment Consultants
Puneet Dhawan of Accor is brimming with ideas on ways to revive the hospitality sector
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