I am a 48-year-old NRI and my wife is 45 years. We are working in a hospital and earning an average monthly net income of Rs 3,00,000 per month. We have a monthly expense of Rs 1,75,000. We are planning to settle in India within seven years, by then I will be 55 years old. My biggest worry always is whether the amount we accumulated till now is sufficient to meet the post-retirement expenses. Our investments are: NRE FD of Rs 1.25 crore, NRO account Rs 22 lakhs, and residential house value of approximately Rs 1 crore. We have another property worth Rs 50 lakh. This property is currently rented out and fetches a monthly rent of Rs 17,000.
Now, we wish to know whether our existing savings are enough to meet our retirement period expenses. We expect our post-retirement expenses to be Rs 65,000 per month. Please let us know if our present investments are enough and advise us on a suitable retirement plan.
Gibin John, a Certified Financial Planner Replies:
Many people forget to plan for retirement or start planning for retirement very late. They prioritize their immediate responsibilities and family goals over retirement planning, often neglecting their own financial security in their sunset years. Once they see to all their responsibilities, they start thinking about their life after retirement. By then, it becomes too late to plan for retirement corpus and the retirement income generation goes for a toss.
In your case, you have decided to plan for your retirement at the age of 48. Retirement is an important goal akin to any other life goal because maintaining the same standard of living in retirement as you enjoyed during your working years can be challenging as income reduces. During working years, one can achieve goals by taking loans or other financial aids but when it comes to retirement you will not have such options. Therefore, I am happy that you have now given priority to retirement planning.
You expect your post-retirement monthly expense to be Rs 65,000. After we take into consideration inflation of 6%, you need to create a corpus of Rs 2.63 crore, which will be sufficient to maintain the same standard of living, at least till the age of 80. After taking into account the rental income of Rs 17,000 during the retirement period, the required corpus will come down to Rs 2.50 crore, which will be sufficient to maintain the same standard of living, at least till the age of 80. The rent growth is not considered in the calculation.
Currently, you have a balance of Rs 1.25 crore in NRE account and Rs 22 lakhs in NRO account. From this amount, you should set aside a minimum of Rs 7 lakh for emergency requirements. You will be left with a balance of Rs 1.40 crore which will not be sufficient to meet your post-retirement expenses. If this investment fetches 6% interest, then the investment will become Rs 2.10 crore. For filling the shortfall, I suggest that you invest the current surplus amount wisely. Our advice is to invest your existing surplus amount of Rs 35000 every month in equity mutual fund. Assuming your investment generates a return of 10%, you can create a corpus around Rs 40 lakh. Based on the information provided by you, there are no equity-oriented investments, so we suggest small allocation towards equity. This way you can create the retirement corpus amount without selling any property. It is good that you decided now to plan for retirement. Planning for retirement is as important as planning for any other family goal.
After allocating monthly contributions towards the retirement goal, you will have Rs 90,000 balance surplus to invest for other goals or wealth creation. Finally, one more thing, I suggest that you should take a family floater health insurance with a coverage of at least Rs 15 lakh. This will protect your investments from depletion due to unexpected medical expenses.