How to plan for your Golden years? (A Case Study)
Jun 24, 2014

Author: PersonalFN Content & Research Team

With medical advancement, life expectancy of individuals is increasing. Earlier people were living on an average till the age of 65-70 years and now that’s increased to 80-85 years and even more, in some cases. So have you thought how you will manage your expenses after your retirement, when you would require much more to live a blissful retired life?

While some individuals bank on children to look after their retirement needs, all we can say is that in today’s challenging environment, where children themselves have to plan for their financial goals, one cannot solely depend on children to take care of retirement needs.

It doesn’t matter if you are too young or nearing your retirement. The earlier you start planning, higher are your chances that you do not have to be dependent on your children. (See our Video: Time Value of Money & When to Start Investing to know the benefits of starting investment early)

Recently we had a client who came to us for planning his finances with clear mindset that he doesn’t want to be dependent on anyone after his retirement. We strongly acknowledge his premise, and thus want you to learn by his example. Let’s take his case and see how you can also start planning for your golden years.

Personal Details
Name Mr. Rahul
Age 35 years
Retirement Age 55 years
Dependents Only Spouse
Life Expectancy 85 years
Income Rs 1,05,000 per month
Expenses Rs 75,000 per month

Mr. Rahul a 35 year old married individual wanted to retire at the age of 55 years. His spouse was the only member of his family dependent on him. He and his spouse were expected to live till 85 years as per their family history. He was earning Rs 1,05,000 per month, while his expenses were Rs 75,000 per month, thus he was left with a monthly surplus of Rs 30,000.

S.No. Type of Assets Amount (Rs)
1 Equity Mutual Funds 1,000,000
2 PPF 600,000
3 EPF 500,000
4 Bank FD 1,000,000
5 Gold Mutual Funds 300,000
6 Residential Flat (Self-Occupied) 10,000,000
7 Cash in Bank 600,000
Total 14,000,000
S.No. Type of Liability Amount (Rs)
1 Home Loan 4,000,000

Assets and Liabilities

Mr. Rahul’s biggest investment was his residential house of Rs 1 crore for which he had an outstanding home loan of Rs 40 lakhs. The Equated Monthly Installment (EMI) of Rs 35,000 per month, which had already included in his monthly expenses mentioned above. He had a small proportion of his total assets invested in Equity via Equity Mutual Funds, some investments in debt via Public Provident Fund (PPF), Employee Provident Fund (EPF) and Bank Fixed Deposit. In EPF he and his employer together were contributing Rs 4,000 per month. He was also maintaining 8 months of expenses as contingency reserve in cash in bank.

And here was Mr. Rahul's Financial Objective!

He wanted a peaceful retirement without any worry of managing his regular expenses after retirement. And thus, he approached PersonalFN for guidance for building a retirement corpus and the asset allocation he should maintain to achieve the same.

Retirement Corpus Required by Mr. Rahul

As studied earlier, Mr. Rahul had current expenses of Rs 75,000 per month (including his EMI of Rs 35,000 per month for home loan). But since his home loan was going to be paid off by retirement age, his EMI amount (of Rs 35,000) was not required to be taken while planning for retirement. Thus instead of Rs 75,000 as expenses, his expenses in current terms to maintain the same lifestyle post retirement were taken as Rs 40,000 for planning purpose.

He also wanted to make a provision of Rs 1 lakh per annum for travel and heath care expenses which was over and above his regular monthly expenses. Assuming inflation of 7% and post retirement return of 8% he required a retirement corpus of Rs 5.84 crores at retirement. (Use our: Retirement Calculator to calculate your retirement corpus)

PersonalFN recommended him the following:

  1. Change the Asset Allocation

    Since Mr. Rahul was just 35 years old and wanted to retire at 55 years, he had a sufficient long time horizon of 20 years. And thus we advised him to invest a dominant portion of his portfolio in equity, which until now was skewed towards debt instruments. This is because, equity as an asset class has the ability to beat inflation over the long-term.s. This is because, equity as an asset class has the s. This is because, equity as an asset class has the Thus on the basis of the above and high monthly surplus, we had recommended him 70% allocation in Equity, 20% in Debt and 10% in Gold. (Download our: Equity Guide for FREE to know how to build a stock portfolio)
  2. Redeem existing Sector Funds

    You see, in his mutual fund portfolio he had some sector funds which were not suitable to his risk appetite. So, we recommended him to sell those and reinvest the redemption proceeds in diversified equity mutual funds. Equity Mutual Funds are expected to give him Rs 1.64 crore at retirement assuming a 15% return on equity.

  3. Start SIP

    We recommended him to start a SIP of Rs 21,000 per month in diversified equity mutual funds for 20 years. His fresh investments in Equity are expected to give him Rs 3.18crore at retirement assuming a 15% return on equity.

  4. PPF

    PPF account was opened 5 years back and still had 10 years to maturity. We advised him to extend it for another 2 block of 5 years i.e. total of 10 years, after original maturity of the PPF account. We also advised to invest Rs 6,000 per month before 5th day of every month till retirement. PPF account will give him Rs 63.55 lakh at retirement assuming 8% return on PPF. (Download our: PPF Guide for FREE to know all the details about PPF)

  5. EPF

    EPF account at retirement is expected to give him Rs 48.35 lakhs. (Download our: EPF Guide for FREE to know all the details about EPF)

  6. Invest in Gold Mutual Funds

    Gold mutual funds are good way of investing in gold; so we advised him to hold it and invest further Rs 3,000 per month for 20 years. Gold Mutual Funds are expected to give him Rs 27.83 lakh at retirement assuming a 7% return on Gold.

Thus on the basis of the above advice, Mr. Rahul in total will have Rs 6.21 crore at retirement as against required retirement corpus of Rs 5.84 crores.

He is able to achieve his retirement goal comfortably mainly because of proper asset allocation (which he needs to follow) and of course the advantage of starting early. If he would have delayed it by another few years and continued to invest mainly into debt, then it would have been difficult for him to achieve his goal.

Similarly, it may be a right time to start planning for your retirement.

If you want to plan for your retirement, but don't know where to start it from; you can sign up for PersonalFN's 'The Retirement Letter' or contact us on 022-61361200.

At your convenience, you can also Schedule a Call with our investment consultants or drop an email to and we will get in touch with you. We would be happy to plan your finances prudently to help you achieve your life goals.

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