Your Financial Plan



I am 53. I work for the government and will retire by 2022. My wife, 48, is a home-maker. My son has just got settled. All along I never thought of retirement, but now I am a little concerned. My current expense is ₹25,000 per month. Can I survive on my pension alone? I love visiting places and plan to travel at least for 10 years once I retire.

Himadri Chakraborty

For most people, earning a real return is a challenge most of the time. Real return is nothing but interest earned minus inflation. To offset the gap, a slightly bigger corpus will be helpful during years of high inflation.

The pension growth will be less than the inflation so there will be a shortfall in the monthly income after a certain period. In your case, post-retirement monthly expenses are on the higher side. Since you live in your own house, the present value of ₹25,000 will be comfortable for two to meet the monthly expenses. If you spend more, you may have to dig the capital and you will run out of money after 77 years.

The present value of ₹25,000 will be ₹35,000, if inflated at 7 per cent till 2022. If your expenses increase at 7 per cent and pension grows at 4 per cent, by the time you turn 72, you will have a monthly shortfall of ₹1,000 and it could go as high as ₹64,000 when you reach 85.

To bridge the gap, if you deploy the retirement proceeds of ₹35 lakh in fixed deposit and earn post-tax return of 6 per cent, you can manage the shortfall till 78.

If you redeploy earlier year surplus, you can manage till 85. Since the shortfall is from the age of 72, till such a period, you can visit places with your interest income. Post retirement, till 72, invest the monthly surplus in mutual fund balanced funds. Once the loan is over, accumulate the fund for emergency needs.

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

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