I am 50 years old and due for retirement in 2021. My wife, aged 47, is a home maker. My son is employed and my daughter is pursuing her graduation. My net salary is Rs 42,000. I live in my own house and our monthly expenses are Rs 25,000, besides EMI commitment. 

Investments:

I have a semi-independent house worth Rs 1.5 crore. I have three plots in Chennai worth Rs 1 crore. Through inheritance, I will get a plot worth Rs 17 lakh.

Provident fund balance is Rs 18 lakh . I have PPF account whose current balance is Rs 2.4 lakh.

After experiencing losses in equity and futures & options, I have not invested in equity or mutual funds. 

Loans:

Home loan outstanding is Rs 5 lakh, EMI is Rs 4,700 and it will be repaid in 2021. For my plot I had availed a loan of Rs 30 lakh for which I pay an EMI of Rs 20,000 and will continue to do so till 2014.

My son will join a B-schoo, after quitting his job and we may meet the cost by an education loan. Once he joins the course, my monthly surplus will be nil. However, I am expecting wage revision of Rs 10,000.

My daughter is planning to join an MBA course in a reputed college, for which I may require Rs 6-7 lakh. For her marriage (after four years), I may require Rs 15 lakh in today's value.

I also might require Rs 8 lakh in 2016 for my son's marriage.Under my employment, I have medical reimbursement and hence I have not taken extra health cover. Post retirement, I will have medical cover from my employer for two years. Do I need to buy a medical cover?

I have taken a term plan for Rs 6 lakh and my son is covered for Rs 50 lakh, for which I pay premium of Rs 7,000.  Post retirement I will receive Rs 10 lakh as Gratuity, EPF- Rs 50 lakh and will be eligible for a fixed pension of Rs 18,000 . My wife and I expect to live up to 78 years.

Is all this sufficient to live till our live expectancy without taking reverse mortgage? I wish to leave the property after our death to our children.

  — Shanmugam (name changed)

Risk perception and risk tolerance are important aspects in investment decisions. Risk perception will fluctuate in the short-term based on the external environment. But risk tolerance is an inherently critical aspect in deciding asset allocation. You traded on equity-based on your risk perception. Losing money in trading should not impact your appetite for equity investments.

You have not followed proper asset allocation. So, within the equity portfolio you could have allocated a small portion for trading. Since you went over weight on real estate, your exposure to debt too is not adequate. Although you have a good chunk of your portfolio in EPF, it is not liquid.

Once your surplus increases, we suggest you relook your investment strategy.

Education loan

As your portfolio is overweight on real estate, your liquidity is extremely tight.

Your son may take an education loan but you need to pay interest for borrowing and it may be the case with your daughter too.

So this will further decrease your surplus. Check with your home loan provider if they will offer a facility to reduce your EMI.

But if you take a loan, you will be eligible for tax benefits for the interest paid since your son will be out of job.

Retirement

Your current household expenses are for three people. This is likely to come down post retirement. Assuming the current expenses for two to be Rs 2.4 lakh a year and if the same is inflated at 7 per cent, in 2021 it will be Rs 4.4 lakh.

To receive such an income till 80, you need to have a corpus of Rs 79 lakh and it should earn a return of one per cent over and above inflation.

Although your retirement corpus is short by Rs 19 lakh, with your pension of Rs 18,000, you can comfortably meet your monthly needs.

For your children's marriage, utilise the EPF fund to meet the expenses. Sell plots post retirement since your income will be lower as will be your tax outgo.

Although you are eligible for medical reimbursement for the first couple of years post retirement, take a health cover few years before retirement to protect your retirement corpus.

sureshpartha@

thehindu.co.in

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