I work in the IT industry and plan to retire in the next 10 years. I had already planned and kept my daughter’s education expenses ₹50 lakh for this purpose. Currently, this amount looks good considering her educational plans. I invested in two properties whose valuation is approx ₹1.2 crore today and for which I will pay EMI (Equal Monthly Installments). ₹34,000 for the next three years. Besides, I have it ₹12 lakh in mutual funds and ₹10 lakh in my provident fund account. Not only do I want to retire with enough money for my post-retirement life, but I also want to travel every year for the first seven years that I will need ₹5 thousand per year. Please assist me plan this. What funds can I invest in?
— Name withheld upon request.
It is always better to evaluate the corpus required to achieve your financial goals as it can assist you invest in a planned manner just like accumulating ₹50 lakh for your daughter’s education.
One of the best ways to work on your retirement capital is to look at your current expenses and add inflation to them. Today, if we assume that you are retiring and want to maintain your lifestyle, you and your spouse will need ₹75,000 per month and then after 10 years at an annual inflation rate of 6% you will need ₹1.35 lakh in retirement to take care of the same expenses.
Inflation will continue even after retirement and to assess the corpus we will have to add the years after retirement as well. If we assume that in 30 years you will need a corpus of approx ₹3.20 crore to meet monthly expenses after retirement. You will need an extra one ₹24 lakh for an annual post-retirement travel plan for seven years. Therefore, you may want to consider a target amount of ₹3.5 crore for your pension.
You’ll need to factor in real estate investments and plans to operate them for retirement. Since real estate is subjective and growth rates vary depending on location and other factors, you should try to evaluate your potential growth and rental income if you plan to keep these investments.
Your current mutual fund portfolio can assist with accumulation ₹37 lakh if it grows at an average of 12% per annum and provident fund ₹20 lakhs. Equity mutual funds may perform better because you have 10 years to build your retirement corpus. Some of the funds you can consider are Parag Parikh Flexicap, ICICI Prudential Bluechip Fund, HDFC Vast & Mid Cap Fund, Nippon India Growth Fund and 360 One Focused Equity Fund. You may consider consulting a financial advisor who will be able to provide you with additional information such as cash flow, real estate investment analysis, etc.
Harshad Chetanwala is the co-founder of Mywealthgrowth.com
Posted: Jun 5, 2024 18:23 EST
