I am 32 years old and my husband is 34 years old. Together we earn Rs1 crore per annum. We have a son for whom we have already saved funds to finance his higher education and marriage. We have no other dependants. Our current lifestyle warrants expenses of Rs1.5 lakh per month. We plan to construct a house in 2016 at a cost of Rs1.5 crore at today’s value. Our current portfolio size is Rs1.5 crore, 80% of which is invested in a diversified mutual fund portfolio that is being topped up each year with Rs80 lakh (through a combination of systematic investment plan, or SIP, and systematic transfer plan, or STP) and the remaining in real estate and gold. We would like to retire from active professional life at the end of FY17. With the current approach, is it a realistic goal given that we would like to maintain a similar lifestyle in our post-retirement years?
You are doing well in your professional life. However, you want to retire from active work life six years from now. While you have created a corpus for your son’s education and marriage and assuming your two years of saving will provide the necessary savings for the construction of a house, it will not be possible to live off your savings for the rest of your life considering your current lifestyle.
As per your plan, you will retire at 38 and your husband at 40. You would have at least another 40 years to provide for (assuming a life span of 80 years). Your four years of savings will not take care of your expenses for the next four decades and when you include inflation-adjusted expenses, the numbers fall terribly short.
In case the reason for retiring from active professional life is reducing your working hours or taking up a less strenuous job or even start working independently, then you will have a stream of income albeit lower. But still you have to make sure the income meets your monthly expenses and you are able to save a part of the same for your retirement corpus. While it may not give you the kind of income which you are earning right now, it will give longevity to your work life.
As far as your investments are concerned, it’s good you have a diversified mutual fund portfolio. You have been right in having a combination of SIP and STP and taking some exposure to real estate and gold.
In addition, you need to make sure you have a good health insurance policy covering all three of you even if your current employer provides one.
Surya Bhatia, certified financial planner and principal consultant, Asset Managers
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