I am a 42-year-old IT professional. I intend to work until I turn 65. My wife is a home-maker. My daughter is 12 and son, eight. I plan to sell my mutual funds and stocks to make pre-payment and reduce my EMI to match my rental income of ₹15,000. Please advise.

Ganapathy

You can set-off the entire interest paid on home loan to bring down the borrowing cost. Service the interest part and don’t sell equity to close the loan. With the economy turning around, 12-15 per cent return in equity should not be a challenge against your borrowing cost of 9.5 per cent.

Education : For your daughter’s education, earmark equity investments and if the portfolio earns 15 per cent it will account for ₹34.7 lakh. To meet the shortfall invest ₹15,100 per month in a portfolio that earns 11 per cent return. Invest in the ratio of 60:30:10 in equity, debt and gold, respectively. For your son’s education cost of ₹25 lakh, invest ₹10,900, it should earn 12 per cent return.

Retirement : Better presume the retirement age as 60. Household expenses will be ₹1 lakh when you turn 60, if inflated at 7 per cent. So, a retirement corpus of ₹2.68 crore is needed, earning 1 per cent over and above the inflation to sustain till you turn 85.

If your EPF contribution, increasing by 5 per cent along with your salary, earns 8.75 per cent return at retirement along with existing PF balance, the corpus will be ₹2.06 crore. To meet the shortfall, invest ₹4,000 and increase it by 10 per cent every year till retirement. The rental income, gratuity and leave salary will be a cushion to meet any shortfall. Earmark PPF for your daughter’s marriage although it is not part of the goals.

The writer is a SEBI-registered investment advisor and founder, myassets consolidation.com

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