«

»

Aug 17

(No title)

I am a 32-year-old bank employee. My spouse too works in the same bank. We have a two-year old son. Together, we save ?5,000 in RD every month. I plan to close the RD and start increasing investments in mutual funds. At retirement we are eligible for pension. We contribute ?6,700 towards EPF. Do check our portfolio and suggest corrective measures.

Anish

Till you achieve your goal, it is best to stick with the asset allocation decided upon and stay invested.

Education: For your son’s education you need to invest ?5,200 for the next 16 years and the portfolio should earn a return of 12 per cent to reach the target of ?30 lakh. Follow allocation of 60:30:10 in equity, debt and gold to meet the return target.

Home: Since you plan well in advance to buy a house it’s better to restrict the home loan to 40 per cent of the total cost. If you wish to fund ?60 lakh you ought to save ?26,000 monthly against the available surplus of ?18,000, inclusive of your existing investments. Once your personal loan is complete start contributing a higher sum to meet this goal. You can even sell the existing house to cover part of the cost.

Retirement: If your your basic salary increases by 5 per cent every year you can comfortably build a retirement corpus for the same standard of living. Consider this: your current monthly expenses of ?20,000 will be ?1.32 lakh at retirement, if inflation averages at 7 per cent. To meet monthly needs at retirement you need a corpus of ?3.26 crore and it should earn 1 per cent return above inflation. If your current balance and future contribution continue to earn a return of 8.75, at retirement, your EPF kitty will be ?3.23 crore. With your retirement benefits you can bridge the shortfall.

 

 

The writer is a financial planner and founder, myassetsconsolidation.com. Send your queries to blinefp@gmail.com

(This article was published in The  Hindu BusinessLine, on August 16, 2015)

 

Leave a Reply