Investing for goals will help build your portfolio

I am 51 and my wife is 49 . We have two daughters, one aged 20 studying second year engineering, the other is in class nine.

My annual salary post-tax is Rs 15 lakh with yearly performance pay of Rs 3.5 lakh. My wife is taking VRS and she will receive a pension of Rs 15,000 a month.

We get rental income of Rs 6,000 a month from our property in Coimbatore. My family is covered by employer group medical insurance; I and my wife will be covered till we live. Our life expectancy is 75 years.

Cash outflow:

Household expenses - Rs 35, 000

Premium towards insurances for me and my wife - Rs 20,000

Investment through SIP - Rs 15, 000

Educational expenses for our daughters - Rs 15, 000

EMI towards Housing (June 2020) - Rs 40,000

We have Rs 2.5 lakh in a bank FD for contingent expenses.

Financial assets in (Rs lakh)

Equity- 15

Mutual Fund - 13

Pension Fund - 5

FD/PPF/Bonds - 10

Gold - 12

Immovable Assets:

Mumbai flat - 55

Coimbatore flat - 50

Plot - 50

Insurance:

Savings - 17

Term - 25

Retirement benefits:

PF present value is Rs 25 lakh and my salary has been growing at 5 per cent. Gratuity at retirement will be Rs 20 lakh.

Superannuation benefits in present value Rs 13 lakh.

Leave encashment - Rs 7 lakh

Future requirement:

All data in present value:

Elder daughter's likely MBA costs - Rs 5 lakh

Younger daughter's higher education - Rs 10 lakh

Elder daughter's marriage, planned for 2015 - Rs 20 lakh

Younger daughter's marriage in 2018 - Rs 20 lakh

Post retirement household monthly expenses - Rs 25, 000

Provision of Rs 10 lakh for medical expenses after I turn 70

One world tour after retirement, estimated at Rs 10 lakh

Queries:

We wish to purchase a house in Chennai by making use of her VRS benefits of Rs 20 lakh and by selling our plots.

Can I meet all my future goals with the present financial status? What additional savings do I need?

Considering my age do I need to change my investment strategy?

I plan to retire at 55. Can I meet my post retirement expenses with retirement benefits?

Our insurance policies will mature in phases with values of Rs 20 lakh plus bonus by 2019.

- Balakichenan



Your portfolio is already overweight with real estate and if you wish to purchase another house, you need to sell your plots. So for a flat of Rs 50 lakh, sell your plots to raise the amount .

If your investment exceeds this value, take a home loan not higher than Rs 15 lakh. If you are planning to retire in another five years, take a loan for a similar tenure.

For a five year loan your total interest out go will be Rs 4.23 lakh if you borrow at 10.25 per cent.

To meet the EMI of Rs 32000, utilise the rental income from the property and performance pay.

If you happen to rent the flat till you retire, entire interest paid towards home loan can be adjusted against your income. If your wife is holding some part of the plot, buy the house jointly as this will reduce your tax on the rental income.

Invest your wife's VRS proceeds in a FD in your younger daughter's name and redeem the same when she is ready for employment. This will help you to earn interest without any deduction.

Take conservative bets on investments.



Meeting goals: You can comfortably meet all your goals as all the right investments have been made. What you need to do is to earmark each for a specific goals and manage it.

For your elder daughter's marriage allocate your equity investments and rebalance your portfolio with large cap stocks and ensure that you are achieving 10 per cent return .

Start a bank RD in her name for Rs 6, 470 for next 24 months and earn 10 per cent to reach the goal.

For your younger daughter's higher education utilise the debt investments. For her marriage, build a portfolio with mutual funds for the next nine years generating at least 12 per cent.

If there are any abnormal returns, book profits and shift proceeds to debt schemes. Continue your current SIP of Rs 15,000 and keep it as buffer to meet short fall in any of the goals.

Retirement: The present value of Rs 25,000 a month will be Rs 35,000 in another five years, if inflated at 7 per cent.

Post retirement, if your investments return beat inflation by a percentage point, it will meet your household expenses till 80. At retirement you should have corpus of Rs 92 lakh.

Your retirement benefits will be close to Rs 80 lakh. With pensions and rental income, you can lead a comfortable life till 80.

Even if your standard of living increases, maturity proceeds of your wife's VRS investment and pension plan can help you to meet the needs.

International tour: The maturity proceeds of your insurance will be Rs 30 lakh and utilise the same for your vacation.

Use a part of the balance to close your existing home loan and the rest for medical emergencies.

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