I am 45 and my wife is 42. Both are architects who have returned to India after working abroad for six years. We are employed and our combined income is Rs 60,000 after tax. We have boys aged 13 and 9. I have aged parents who manage their monthly expenses on their own. But I give them Rs 5,000 a month.

Our monthly expenditure is Rs 45,000 inclusive car EMI (Rs 6,250) and rent (Rs 5,000). Our monthly surplus of Rs 15,000 is invested in fixed deposits. We are planning to work for 13 more years. Our assets are predominantly invested in debt. We have fixed deposits for Rs 40 lakh. We hold another Rs 40 lakh in our savings bank account and Rs 5 lakh in shares. My wife has a life insurance policy for a sum assured of Rs 5 lakh and the premium outgo is Rs 25,000. We need to pay the premium till 2017 and the policy matures in 2027 with a value of Rs 18 lakh. We have three inherited plots and the value is Rs 2 crore. In our village, I have a property (valued at Rs 15 lakh) where my parents are living. We want our children to study engineering and MBA. How much will we need to provision from our savings.

We need to spend at least Rs 3 lakh in today's value for our sons' marriage.

How much should we save for our retirement, taking into consideration our current monthly expenses?

We expect our life expectancy to be 85 years.

In our company we are not covered by health insurance; do suggest how much cover we need to have for our family of four. Do we need to take life insurance and if so what is the apt cover?

— Harish Bhatia (name changed on request)

Solutions: To achieve financial goals, it is paramount to have prudent asset allocation. If one wishes to meet all financial goals through debt investments, the capital required will be higher.

As you have inherited immovable assets, you need to balance your investments between debt, equity and gold. With your current earning and savings, most of your goals are achievable. To protect all your goals you need to take term insurance besides health insurance for any medical emergency.

Education: For your elder son's engineering, you may require Rs 8.6 lakh. As the time left for his engineering days is short, it is better to invest a lump sum from your cash position. You need to invest Rs 6.5 lakh in fixed deposits at post-tax yield of 6.5 per cent. For his MBA you may require Rs 8.5 lakh after seven years. So start investing Rs 6,200 a month for 84 months and it should earn a return of 12 per cent.

For your second son, monthly saving can help meet the requirement. To pursue engineering Rs 12 lakh is needed and you ought to save Rs 7,650 a month for the next 96 months. For our calculation, we have assumed inflation at 7 per cent. For his MBA, your requirement will be Rs 11.5 lakh in 12 years . To reach that, save Rs 3,600 for next 144 months.

These monthly savings should earn 12 per cent.

Retirement: If you live till 85, to meet inflation-adjusted current monthly expenses of Rs 40,000, at the time of retirement you should have a corpus of Rs 2.8 crore. This corpus should earn an inflation-adjusted return of one per cent.

Due to your constraints on monthly surplus, we suggest you invest lump sum of Rs 70 lakh at 10 per cent yield for 13 years to reach a sum of Rs 2.4 crore. To meet the shortfall, utilise the LIC proceeds of Rs 18 lakh and proceeds from direct equity investments.

If you do not meet the required returns, you may face a financial burden at the fag end of your life. In such a case, you can dispose any of your plots for your annual living expenses.

Insurance: To protect all your goals you need to take a term insurance for Rs 2.5 crore for which the annual premium will work out to Rs 60,000. You cannot meet the requirement with your monthly cash flows. After spending Rs 66.5 lakh for financial goals you have investable surplus of Rs 13 lakh, which you can use to repay your car loan and use surplus to meet the annual premium payments. If some money is still left, you can keep it as an emergency fund to meet parents' medical needs. For a family of four a health insurance of Rs 4 lakh will cost you Rs 11,800.

Investment strategy: Follow an asset allocation pattern of 60:30:10 in favour of equity, debt and gold. Go for direct equity exposure if you have the time and the expertise. Else, route investment through mutual funds.

Follow our mutual fund recommendations and invest in suggested large-cap, mid-cap, debt and gold funds. Investment in equity should earn a return of 15 per cent and an 8 per cent returns should be pocketed from debt and gold.

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