I am 40, working in an engineering company. My wife works in the private sector. My son is 11 and my daughter five. We are covered under group health insurance. Both of us have endowment cover for ₹5 lakh. My EPF balance is ₹3 lakh and that of my wife’s is ₹2 lakh. Our EPF contributions are ₹4,500 and ₹2,300. How do we go about creating wealth?

Sundarajan

It is not possible to save for all goals with a limited surplus. So, prioritise the goals based on the tenure. Since your wife is younger than you by three years, your actual retirement needs start with her retirement. Defer saving for that goal till you clear your car loan and meet the target for your son’s education. With this strategy reach all goals.

Education : For your son’ s education, save ₹11,700 a month. The portfolio should earn 11 per cent to reach the target (same return assumed for all goals). The maturity value of endowment policies will be ₹17.6 lakh. If you redeploy the same till 2029 and if it earns a return of 7 per cent, it will account for ₹21 lakh. So, you need not save separately for your daughter’s education.

Marriage : Invest ₹3,100 a month and step up by 10 per cent till the goal is reached.

Retirement : The present monthly expenses of ₹30,000 will be ₹1.24 lakh when your wife retires in 2037. To have such income then, you need ₹3.5 crore. If both your EPF contributions earn a return of 8.75 per cent at the time of your wife’s retirement the balance will be ₹1.48 crore. To meet the shortfall of ₹2.02 crore, from 2022, invest ₹31,000 per month and step up the same by 10 per cent for 14 years to reach your target. It is surprising that despite a big loan outstanding, you do not have term insurance. Buy risk cover of ₹1 crore each.

The writer is a SEBI-registered investment advisor and founder, myassetsconsolidation.com Send your queries to blinefp@gmail.com

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