Quoted (Economic Times) – Jan 2023 – 58-Year Old Planning for Retirement Income from 2024
I was recently quoted in Economic Times WEALTH (30 January 2023) in the Q&A section where a panel of experts answers readers’ questions related to various aspects of their personal finances. .
The word-for-word question is given unelevated –
Here is the vendible page where the query is answered:
Here is the text version of the query and the reply –
Q – I am 58 years old and superannuating in July 2024. My current household expense is approx Rs 60k per month. I have an suite in Bangalore and one racial house in Kolkata. After retirement, we plan to live in both these places alternatively. The market value of my present savings is approx Rs 2 cr and the break-up is below:
1. Equity: Rs 23 lakh
2. Wall FD @ 7% interest: Rs 3 lakh ( to be matured from 1 August till 1 Dec 2024, Rs 53k per month)
3. NPS (Tier I & II): Rs 38 lakh
4. EPF: Rs 70 lakh
5. Superannuation fund: Rs 43 lakh
6. Gratuity & leave encashment: Rs 13 lakh
7. Pension from LIC (started): Rs 9,500 per month
8. My wife’s savings in NPS: Rs 10 lakh
9. Her savings in FD: Rs 4 lakh
My wife and I have family-floater health insurance of Rs 5 lakh wiring and Rs 45 lakh of super top-up for which we pay Rs 50K premium per year. I may earn a take-home salary of Rs 60 lakh till my retirement. I have major expenses of an outstanding home loan of Rs 7 lakh and son’s marriage expenses well-nigh Rs 15 lakh. I have SIP for NPS Tier II for Rs 50,000 per month and for probity Rs 50,000 per month and one lumpsum investment of Rs 50,000 per year in NPS Tier I for tax savings. I wish to start a wall FD of Rs 50,000 per month with maturity to uncurl with my post-retirement period. I have once covered six months from my retirement and with 19 months to go for my retirement, I plan to do 19 increasingly monthly Rs 50k FD investments, so that I have unpreventable income of Rs 55k (with interest) from FDs and Rs 9.5k from LIC for 25 months from my retirement. Please teach if it is possible to generate Rs 1.5 lakh per month post-tax income from August 2024. If so, where should we invest our money?
A – You have once decided on a strategy to use monthly 50K FDs for the next 1.5 years which when combined with LIC Rs 9500 monthly pension, will take superintendency of the first 2 years of your retirement (Aug-2024 to Jul-2026). This is a simplistic strategy which will requite you a well-appointed runway of 2-2.5 years surpassing we need to squint at other investments for income generation.
The timelines for son’s marriage may not be stock-still but it is unsupportable it will be in the short term. So if its near to your superannuation, then the money coming from Gratuity & Leave Encashment (Rs 13 lakh) can be earmarked for this goal straightaway.
Your monthly home loan EMI details aren’t misogynist but it is unsupportable your loan would be structured to be over with your superannuation and hence, the Rs 7 lakh outstanding today will be over by 2024.
Your question that plane though your current monthly expenses are Rs 60,000 monthly, you want to explore if generating Rs 1.5 lakh post-2024 would be feasible or not. Its not well-spoken why your expenses will suddenly shoot up from Rs 60,000 to Rs 1.5 lakh monthly in just 1-2 years time. The current windfall wiring earmarked for retirement (approx. Rs 1.9 Cr), plane when funded via uneaten Rs 50,000 monthly in NPS and Rs 50,000 in Equities (stocks/MF) and EPF contributions (monthly value unknown), may not be unbearable to generate Rs 1.5 lakh monthly (and increasing with inflation) from 2024 onwards till life expectancy of 90. So you should first reassess the need for Rs 1.5 lakh income vs current requirement of Rs 60,000.
Assuming you are worldly-wise to dial when to a lower monthly income requirement, here is what can be done. Let your monthly 50K each NPS, probity and EPF protract as it is. On superannuation, wait EPF withdrawal for as long as feasible. This will help generate 8% plus in tax-free returns for a few increasingly years. Your ongoing FD strategy will take superintendency of expenses up to 2026. The superannuation payout of Rs 43 lakh in 2024 can be parked in debt instruments like SCSS, PMVVY (if misogynist then) and debt funds. Once your FDs are exhausted, you can use the interest payouts from SCSS/PMVVY and SWP from debt funds to manage your expenses. Later on, you may have to regularly transfer funds from NPS Tier 2 worth to these debt instruments to replenish. The annuitization of NPS Tier 1 corpus may not lead to any significant pension in your specimen as zillion of the money is going towards Tier 2 account.
In the meantime, when your EPF is withdrawn (close to 2029-30s), park increasingly funds in a combination of debt instruments and a small portion towards increasing probity exposure a bit further. Please note that till, there wouldn’t have been any need to withdraw fund from your probity corpus which would have been growing by itself.
Few year’s lanugo the line, once you have decided which will be your primary residence, consider selling off the other property to remoter prop up your retirement corpus and proffer its longevity. That is thesping you are unshut to the idea of doing it and if you too understand that operational management of a property in a variegated municipality for someone in age 70s may not be that easy.
Your current health insurance coverage of Rs 5 45 lakh seems sufficient. Just to be sure, please do trammels the network hospitals that offer cashless facility in and virtually the pin codes where you will be spending most of your time post retirement in both cities where you have your houses in Bangalore and Kolkata. Your wife’s FD of Rs 4 lakh can be kept as a buffer for unexpected or unplanned expenses.
You can read my previous responses in Economic Times Ask The Expert section using the unelevated links:
- ET Wealth – Dec 2022 (link)
- ET Wealth – Nov 2022 – (link)
- ET Wealth – Oct 2022 – (link)
- ET Wealth – July 2022 – 2nd (link)
- ET Wealth – July 2022 (link)
- ET Wealth – June 2022 – 2nd (link)
- ET Wealth – June 2022 – (link)
- ET Wealth – April 2022 – 2nd (link)
- ET Wealth – April 2022 – (link)
- ET Wealth – March 2022 – 2nd – (link)
- ET Wealth – March 2022 – (link)
- ET Wealth – February 2022 – 2nd (link)
- ET Wealth – February 2022 (link)
- ET Wealth – January 2022 (link)
- ET Wealth – December 2021 (1st) (link)
- ET Wealth – December 2021 (2nd) (link)
- ET Wealth – August 2021 (link)
- ET Wealth – July 2021 (link)
- ET Wealth – June 2021 (link)
- ET Wealth – March 2021 (link)
- ET Wealth – November 2020 (link)
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