Q. I am married to 41 years old and 8 year old kid. I want to retire in the coming months. I had no responsibilities and I took medical insurance with the critical health riders. I plan to sell the property, create a corpus and invest the corpus for general income in debt-based mutual funds with the SWP. My corpus is 10 times my annual expenses. Am I on the right path?
Akhilesh Gokaraju, Hyderabad
A. There are three financial issues that you should consider before deciding your date of retirement. The first is a long life. Longevity determines the number of retired lives you need to fund with investments made during your working years. Earlier you retire, this period is higher and the corpus you need. If you retire in 60 years, the time you need to save for retirement (40 years or more) will be slightly higher than the time you get out of it (say 30 years, 90 longevity). If you retire in 41 years, you must be effectively funded to 49 years of retired life with a corpus built in just 20 years of working life. This is a very long order. If you have dependencies, your work becomes more difficult.
Two, the main challenge in retirement is to defeat inflation with your capital income. That is the problem of retiring early forecasts. At a modest 6% inflation rate, your expenses will double every 12 years. If you retire in 41 years and spend a month and 000 60,000 today, you will need 8 1.8 lakhs to fund the same lifestyle by the age of 60, and 4 90 lakhs (one month) at the age of 10.4. The numbers may seem unbelievable but that is why inflation is a silent killer.
Three, retirement may not be the only goal you need to work on and you will have to take care of your life costs, your child’s educational expenses, and the emergency fund that covers two years ‘ expenses for you and your wife if your wife is alive. Even any medical contingency conditions. All this requires more savings.
According to the above, the investment of 10 times your annual expenses is not very enough to see you through retirement. In fact, the thumb rule of 25 times costs also targets people retiring at 60 and this depends on the American context in which inflation levels are very low and real revenue high.
To cater to Indian inflation and returns, you need to have your annual expenses 30 times at 60. Remember that the costs that we are talking about here are at your inflation-adjusted costs of 60, not your current costs.
It is not clear from your question whether the sale of property will fetch you additional amount exceeding the 10 times costs you mentioned. We suggest that you consult a financial planner. For your children’s education, Sukanya is a good loan choice, but it is not enough to match the rising educational costs. You should replace with an investment in a Multitap equity fund via SIP route.
Earn 1 crore
Q. My age is 32. I want to set a target of ₹ 1 crore in 10 years. I have already started the CIP in the SBI Small Cap fund, SBI mid-Cap Fund, SBI Magnum tax gain and SBI banking and Financial Services Fund. Now I want to invest in the Nifty bank index. Please guide me.
M. Rocky, Imphal
A) to reach the target of ₹ 1 crore in 10 years, at 12% annual revenue, you have to invest about, 4 43,470 per month. Although we do not recommend specific funds, we refer to every Multitap fund from various AMC to meet your targets, a nifty next 50 fund and SIPS in a mid/small Cap fund.