Invest judiciously to meet all your goals

I am 48 and my wife is 39, a housewife. We have two daughters who are 16 years and 10 years old. I am working in an MNC and my monthly net income is Rs 65,000. My household expenditure is Rs 18,000, inclusive of rent. In MFs, I make SIP investments of Rs 15,000. I save Rs 5,000 a month for gold and my home loan EMI is Rs 16,400 (loan Rs 10 lakh).

To meet my insurance premium I save Rs 5,000 monthly. I have an investment surplus of Rs 5,000. From January 2012 I am planning to rent out my new flat for Rs 10,000. From the sale proceeds of my plot in Chennai I have booked one more flat. Possession of the flat is expected in June 2013. As my children are studying, I may not move out of my present locality and may rent out this flat too for Rs 10,000.

Apart from my fixed assets, my current investments are Rs 8 lakh including gold (25 sovereign), fixed deposits and stocks. In my current employment, I have no EPF facility, but my current balance in PPF is Rs 75,000.

My elder daughter's education expenses for four years from 2012 would be Rs 9 lakh and a similar amount would be needed for my younger daughter. In our region we have to spend at least Rs 10 lakh for marriage, besides providing for 50 sovereign of gold (eight grams per sovereign).

How much do I need to save based on the current inflation? How much do I need at the time of retirement considering monthly household expenses of Rs 13,000 for two of us till at least my anticipated life expectancy of 75? Go through our investment portfolio and please comment.

We have six insurance policies for sum insured of Rs 16 lakh, maturing in different years. But one policy for sum assured of Rs 12 lakh is maturing in 2038. My company has no medical cover and I do not have Mediclaim. — Sunil

Solutions: Your investment portfolio reflects that you have not adequately saved in the early part of your earning life. For individuals in their late forties, investment income should be sizable. But your investments in financial instruments are too low. For an individual who starts investing early, reaching goals are easier and accordingly one can take higher risk. This reduces your monthly contributions. As you age, lifestyle and other expenses will increase, squeezing your surplus. Limited surplus will not permit you to start saving for all goals immediately.

Bridging the shortfall would have been easier if you had purchased only one house.

Education: With your elder daughter's higher education being a relatively short-term goal, you may have to restrict yourself to fixed income investments. The first year fees may have to be met through internal accruals. To meet the expenses of Rs 6.75 lakh to complete the course, you ought to save monthly Rs 20,026 for next 45 months and it should earn an interest of 10 per cent.

You can start investing for your younger daughter once you start receiving rent.

The value of Rs 9 lakh will be Rs 14.5 lakh if inflated at 7 per cent (same rate is factored for all goals). If you earmark insurance maturity proceeds of Rs 6 lakh, the shortfall will be Rs 8.5 lakh. To reach the target you need to save monthly Rs 8,116 for 72 months and it should earn at 12 per cent.

Marriage: Till you rent out your second flat you will not have surplus to invest for this goal. For your elder daughter's marriage, the present value of Rs 10 lakh will be Rs 16.5 lakh in next seven years. To meet the target you need to save Rs 12,400 for next 84 months and it should earn 12 per cent return.

For your younger daughter, Rs 10 lakh will be Rs 25.7 lakh in 14 years and you ought to save Rs 11,200, which earns 12 per cent, for 120 months. As you don't have surplus do evaluate the goal once education target is reached.

Regarding gold, as you have accumulated 200 grams for your elder daughter, your shortfall is 200 grams. If you accumulate an average of 2.4 grams per month you can meet the required 400 grams. As you don't have surplus, start accumulating once the target for your elder daughter's is over in 84 months. From there on, if you accumulate 11 grams per month you can reach the target in 36 months.

Retirement: In general, women tend to have higher longevity than men. As your spouse is younger to you by nine years, it is better to calculate the required corpus till she is 78. The household expenses of Rs 13,000 will be Rs 3 lakh at retirement. To receive such an income at retirement you should have a corpus of Rs 90 lakh.

We presume after retirement you will stay in one of the flats and let out the other. Along with the maturity proceeds of Rs 25 lakh from HDFC insurance Plan you will have a shortfall of Rs 30 lakh.

As your working life is shorter and you have many goals to meet, you will not be in a position to save. The best option to make good any shortfall is to sell one of the flats or reverse mortgage (pledge) a property.

Insurance: Your immediate priority is to take health and term insurance for Rs 3 lakh and Rs 1.2 crore and your annual premium outgo will be Rs 13,000 and Rs 30,000 respectively. Use your fixed deposits for the premiums.

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