I work in the IT industry and have plans to retire in the next 10 years. I have already planned for my daughter’s education expenses and kept ₹50 lakh aside for this. At present, this amount looks good based on her education plans. I have invested in two properties that are valued at ₹1.2 crore today, and on which I will be paying EMIs (equated monthly instalments) of ₹34,000 for three more years. Other than this, I have ₹12 lakh in mutual funds and ₹10 lakh in my provident fund account. I not only want to retire with adequate money for my post-retirement life, but I also want to travel every year for the first seven years, for which I will need ₹5 lakh every year. Kindly help me in planning for this. Which funds can I invest in?
—Name withheld on request.
It is always better to evaluate the corpus required for your financial goals as it can help you to invest in a planned manner, something similar to what you did to accumulate ₹50 lakh for your daughter’s education.
One of the best ways to work on your retirement corpus is to look at your current expenses and add inflation to them. If we assume today that you are retiring, and to maintain your lifestyle, you and your spouse will need ₹75,000 every month, then after 10 years with an annual inflation rate of 6%, you will need ₹1.35 lakh at retirement to take care of the same expenses.
Inflation will continue even after your retirement, and to evaluate the corpus, we will also need to add the post-retirement years. If we assume that as 30 years, you will need a corpus of close to ₹3.20 crore to take care of your monthly expenses after retirement. You will need an additional ₹24 lakh for your annual post-retirement travel plan for seven years. Hence, you can consider a goal amount of ₹3.5 crore for your retirement.
You will have to factor in investments in real estate and plans to use it for retirement. As real estate is subjective and growth rates differ based on location and other factors, you must try to evaluate your prospective growth and rental income if you plan to retain these investments.
Your present mutual fund portfolio could help accumulate ₹37 lakh if it grows at an average of 12% per year, and provident fund of ₹20 lakh. Equity mutual funds can work better as you have 10 years to build the retirement corpus. Some of the funds you can consider are Parag Parikh Flexicap, ICICI Prudential Bluechip Fund, HDFC Large & Mid Cap Fund, Nippon India Growth Fund and 360 One Focused Equity Fund. You can consider consulting a financial advisor who would be able to guide you with more information like cash flow, real estate investment analysis, etc.
Harshad Chetanwala is co-founder at Mywealthgrowth.com
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Published: 05 Jun 2024, 06:23 PM IST
