How to plan your retirement corpus and charity fund?

My retirement is about 8 years from now and, so far, I have ₹52 lakh invested in mutual funds and stocks, ₹25 lakh in a Public Provident Fund (PPF), and roughly ₹26 lakh in my Employees’ Provident Fund (EPF). My monthly expenses amount to around ₹1 lakh, with savings of ₹62,000 per month. This year, my EPF contribution is ₹1.2 lakh. Additionally, I aim to allocate ₹15 lakh for charity work, post-retirement. How do I structure my retirement corpus?

—Name withheld on request

If we consider inflation of 6% then the monthly amount required for regular expenses at the time of your retirement will be ₹1.60 lakh. The inflation will continue during your post-retirement period as well. If we assume an overall portfolio return of 9% per annum (p.a.) during the post-retirement period, then you will need a corpus of ₹3.45 crore. This accumulated amount can easily help you take care of your post-retirement stage for 25 years.

Your present investments in mutual funds, stocks, PPF and EPF, including an annual contribution of ₹1.20 lakh every year in EPF, could help you reach ₹2.35 crore at your retirement. The charity amount of ₹15 lakh today will be close to ₹24 lakh at your retirement, assuming 6% inflation. Hence, we need to invest to build the additional corpus of ₹1.34 crore for your retirement and charity work requirements. As you have 8 years for retirement and do not have any short-term objectives, you can consider investing in equity mutual funds. You already have a monthly investment from your salary getting invested in EPF, hence investing the bare minimum amount in PPF, going forward, could be a better strategy as it will allow you to invest most of the amount in equity mutual funds.

Assuming a return of 12% p.a., you will need to invest ₹86,000 per month to build the complete corpus for both your goals. As your present monthly investible surplus is ₹62,000, you can still reach the goal by increasing your monthly investment by 11% every year.

Harshad Chetanwala is CFP, co-founder at MyWealthGrowth.com