Quoted (Economic Times) - October 2022 - How to Plan for Daughter's Marriage and Retirement Income?

I was recently quoted in Economic Times WEALTH (10-16 October 2022) in the Q&A section where a panel of experts answers readers’ questions related to various aspects of their personal finances. This one was about how can a 57-year old plan for his daughter’s marriage and retirement income planning using existing savings and income in the remaining 3 years before retirement. The exact question is given below –

Here is the article page where the query is answered:

Here is the text version of the query and the reply –

Q – I am 57 year old and am working in a pharma company in Bangalore, where my annual salary will increase to Rs 40 lakh next year. My current savings is about Rs 1.5 crore and monthly expenses are around Rs 30,000. My investments are about Rs 90 lakh in FD, Rs 25 lakh MF investments (all in ET money), Rs 10 lakh in stocks, Rs 20 lakh in structured products, and Rs 5 lakh in savings bank account. My current take home salary is Rs 2.4 lakh. I have one daughter and her marriage expenses may be about Rs 35 lakh. I want to retire by the age of 60. Please suggest how I can get Rs 1 lakh every month.

A – You have two major goals now – The daughter’s marriage which would cost around Rs 35 lakh. Given your age, it is assumed that this will happen in the short term (a few years). The other goal is retirement in 3 years’ time. While your current expense is around Rs 30,000 monthly or Rs 3.6 lakh, you wish to have a post-retirement income of Rs 1 lakh monthly or Rs 12 lakh annually. This sudden increase in income/expense requirement should be rethought once at your end. But we will assume Rs 1 lakh monthly income requirement at age 60 here.

But since it’s a short-term goal, we first earmark Rs 35 lakh for the daughter’s marriage. Given the short-term nature of the goal and to keep things simple, you can earmark a part of the FD corpus for this. If the time for this goal is more than 3-4 years, then you can put this amount in debt funds for better post-tax returns.

That leaves about Rs 55 lakh in FD, Rs 25 lakh in MFs, Rs 10 lakh in stocks and Rs 20 lakh in structured products that can be considered as part of the retirement corpus. It’s not clear what exactly is the exact nature/profile of these structured products or whether these are suitable for you or not.

Also, for the next 3 years or so, you will continue to earn Rs 2.4 lakh monthly (as of now) and higher figures as your income is set to increase from next year. Given current expenses of Rs 30,000 monthly and setting aside a bit more as a buffer, you can easily save at least Rs 1.5-2 lakh monthly going forward. This is in addition to your salary deductions based PF contributions (the details of PF corpus are also unknown).

So, while the time at hand is small (about 3 years), it must also be said that your equity exposure is limited if we consider the details of assets, you have provided and assuming the size of your EPF corpus. Therefore, if your risk appetite allows for it, a major chunk of the surplus can be moved into equity funds going forward to generate inflation-beating returns and extend corpus longevity.

Details of your Rs 25 lakh MF schemes is not known. So, assuming that you are open to investing about 50-60% of the Rs 1.5-2 lakh monthly surplus, i.e., about Rs 1 lakh monthly in equity funds, you can go for 50% in large-cap index funds (based on Nifty50). The remaining can be split as 25-35% in Flexicap/Aggressive Hybrid funds and 15-25% in Large&Midcap or Midcap funds. Your existing MF portfolio should also follow a similar allocation across market caps.

Post-retirement at 60, you should consider having a 2-bucket strategy. The 1st bucket will be used to generate income via annual withdrawals and interest, etc. It would be made up of SCSS, PMVVY, Debt funds, FDs, etc. Annuity purchases can be deferred in my view for the time being as annuity increases with age. The 2nd bucket will be made up of an equity-heavy portion that will have a diversified portfolio of equity funds.

Please make sure that you have independent health insurance. If you just have a corporate one and are planning to purchase one after retirement then please don’t make that mistake. Purchase one on your own for a minimum of Rs 15-20 lakh urgently. You don’t want health issues in the next few years (if any) to make it tough/costlier to get health insurance. Also, waiting periods can be passed through easily if you get one now a few years before retirement.

You can read my previous responses in Economic Times Ask The Expert section using the below links: