New Delhi :
I work in Indian Defense Forces and have completed almost 15 years of service. I plan to retire early after 21 years of service (after six more years, i.e. by December 2027). My current portfolio is as follows: Fixed Deposit ( ₹5 lakh); Mutual Funds (Invest in seven funds through SIP for a total ₹22,000 per month); current investment ( ₹1.3 lakh); stock ( ₹2 lakh in 20 stocks in different sectors); Sovereign Gold Bond ( ₹47,000); postal life insurance ( ₹1,500 per month maturing in 2027 and maturing ₹5 lakh); LIC Policy ( ₹3,000 p.a. Maturity period ₹1 Lac); NPS (Investment) ₹5,000 per month from May 2021); Defense PF (Investment) ₹30,000 per month interest of 6.8% and current total amount ₹18 lakhs); Home Loan EMI ( ₹20,000 per month; Repayment period 12 years out of the remaining 20 years); Lump sum amount required as part of pension benefit ( ₹1 crore in 2027); and Monthly Pension (likely to be approx.) ₹50,000 per month after commutation). I am currently buying a flat owned by City A for approx. planning to sell ₹60 lakhs and to use the other ₹20 lakh as part of pension benefit for buying a flat value ₹80 lakh in city B; I don’t have any children, so I don’t need to save for their education, marriage etc. I expect monthly expenses of approx. ₹40,000, in 2027. I want to build a travel fund, as both my wife and I love to travel. We are planning two foreign trips in a year post retirement and want to create enough cash flow to lead a comfortable retired life, spend time for ourselves and do hobbies and travel. Please suggest changes or improvements in the current portfolio and post retirement investment strategy.
—praveen
All the details mentioned in your question helped to work out a possible strategy where you plan to ensure a comfortable retired life and two international trips every year post retirement. While these details were informative, knowing your current age could have been more helpful in working on a more accurate plan. However, to evaluate his financial goals and strategy, assume his present age as 45 years.
The post-retirement stage of 35 years is considered for your retirement. your monthly expenses ₹40,000 on retirement and later in future with 6% inflation can be mostly taken care of with the help of your monthly pension ₹50,000 However, you may prefer to revisit the monthly expenses: ₹40,000 after 5 years which is ₹30,000 assuming an inflation of 6% today. Even though you have only two members in your family from the point of view of monthly expenses, the amount seems a bit conservative considering the overall household and lifestyle expenses today.
Your plans for two international trips each year during your retirement may not work. If we consider and assume these journeys of the first 15 years during your retirement ₹4 lakhs as the cost of each international trip, you will need a fund ₹1.73 crore on retirement for this purpose considering a 6% increase in the cost of international travel every year.
This also means that your entire fund will be allocated towards your travel goal which is not true, so you can consider doing international trips for the first ten years, which will require approx. ₹1.15 crore on retirement for this target.
You can maintain a reasonable amount in your investment portfolio during your retirement phase as you cannot rely solely on your pension. Therefore, out of your net worth, the value of which will be approx. ₹1.7 crores at the time of retirement, you should keep ₹30 million- ₹40 lakhs invested in debt and equity, which can come in handy if you need anything beyond your monthly expenses and travel planning.
Harshad Chetanwala is the founder of MyWealthGrowth.com. Please email your questions to mintmoney@livemint.com.
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