I work in the IT sector and plan to retire in 10 years. I have already kept aside ₹50 lakh for my daughter’s education. I have also invested in two properties currently valued at ₹1.2 crore, with an ongoing EMI of ₹34,000 for the next three years. Alongside, I’ve allocated ₹12 lakh in mutual funds and ₹10 lakh in provident fund. My retirement goal includes yearly travels for the initial seven years, requiring ₹5 lakh annually. Are there amu suitable investment avenues and strategies?
—Name withheld on request
It is always better to evaluate the corpus required for your financial goals as it can help you invest in a planned manner. One of the best ways to work on retirement corpus is to look at current expenses and add inflation to it. If we assume today that you are retiring and to maintain a lifestyle you and your spouse will need ₹75,000 every month, then after 10 years with an inflation of 6% per annum, you will need ₹1.35 lakh monthly at retirement to take care of the same expenses. To evaluate the corpus, we will also need to add post-retirement years. If we assume that as 30 years, you will need a corpus of close to ₹3.20 crore to take care of monthly expenses after retirement. You will need additional ₹24 lakh for your annual post-retirement travel plan for seven years. Hence, you can consider a goal amount of ₹3.5 crore for your retirement. You will have to factor in real estate investment and plans to use it for retirement. As real estate are subjective and growth rates differ based on location and other factors, you must evaluate prospective growth and rental income if you plan to retain these investments.
The present mutual fund portfolio could help accumulate ₹37 lakh if it grows at an average of 12% per year and provident fund to ₹20 lakh. Equity mutual funds can work better as you have 10 years to build the retirement corpus. Some of the funds that you can consider are Parag Parikh Flexicap, ICICI Prudential Bluechip Fund, HDFC Large & Mid Cap Fund, Nippon India Growth Fund, 360 One Focused Equity Fund.
You can consult a financial adviser on your cash flow, real estate investment analysis, etc.
Harshad Chetanwala is CFP, co-founder at MyWealthGrowth.com
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Published: 06 Mar 2024, 02:51 PM IST
