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Home / Money / Q&a /  I am 32 with salary of 62000/month. Can I meet goal like retirement in 2048?
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I am 32 with a salary of 62000/month. I can afford to put 40000/month in UTI Nifty Index fund direct growth for equity part and 4000/month in GPF, PPF for debt part. The current valuation of equity part is 17.38 lakh and debt part is 4.93 lakh. Can I achieve goals like retirement in 2048 and child's higher education in 2037?

- Santu Mondal

As mentioned in your query you would like to plan for your child’s education and retirement in the coming 16 and 27 years respectively, you will also have to set a goal amount to work on it more effectively. It is good to know that you have accumulated some assets so far and are willing to invest more than 60% of your income towards these goals in future.

Let us first check out how much you will be able to accumulate across both equity and debt investment with your accumulated and monthly investment amount after 16 and 27 years. If we assume a 10% p.a. return on equity and a 7% p.a. return on other debt, you will be able to accumulate Rs.2.88 Cr at 16 years and Rs.9.02 Cr at retirement after 27 years. The same investment will help you accumulate Rs. 3.51 Cr and Rs. 12.94 Cr respectively if we assume an equity return of 12%.

While it is not easy to define today what kind of education your child will take up in the future, the best is to consider a reasonable amount for education at this stage. If we assume that you will use Rs.1 Cr for your child’s education after 16 years, you will have close to Rs. 6.31 Cr for your retirement at 10% p.a. equity return and 7.60 Cr at 12% p.a. after withdrawing the amount for your child’s education. This amount of Rs.7.60 Cr will help you to take care of monthly expenses of Rs.46,000/- per month as per today’s cost assuming an inflation of 7% and life expectancy up to the age of 85 years. You may have to evaluate if this amount in today’s term is sufficient for your family to take care of monthly expenses. Most people prefer to target Rs.50,000 to 75,000 of today’s monthly expenses while working on their retirement.

Also would like to suggest you consider diversifying your mutual fund investment across 5 to 6 funds and avoid putting all the money in Index Fund even though Index Funds are good for investing. If you would like to take limited risk then you can look at a higher allocation like 30-40% in UTI Nifty Index Fund and the rest can be invested in actively managed equity funds where there is a scope for the fund managers to invest in companies that are beyond Nifty50 and generate returns for you. This is also because you have a time horizon of a minimum of 16 years at your end to build the corpus.

- Answer by Harshad Chetanwala, founder MyWealthGrowth.com

(Have personal finance queries? Send an email to mintmoney@livemint.com)

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