Ishant,
36 years
Profession: Private employee
Dependents: Two
Where does he stand now?
Income Rs 18.6 lakh
Expenses: Rs 7.4 lakh
(includes household expenses)
Net disposable
income Rs 11.2 lakh
Net worth
Asset Value
Savings Rs25 lakh
Car Rs6 lakh
Gold Rs15 lakh
Total Rs46 Lakh
Financial goals (at current costs):
Expenses At cost
Child’s education and marriage Rs 98 lakh
Post-retirement expenses Rs 120 lakh
(i) Longevity has been projected at 85 years; (ii) The retirement is planned at age 60; (iii) Cost of living grows at 8% per annum, while earnings on savings and investments grow at 10 per cent per annum (iii) Income is assumed to be growing at 8% in line with inflation.
Plan of action
- Term assurance of Rs100 lakh may be taken by Mr Ishant for about 30 years which will cost about Rs17,500 per year. This is to safeguard the family against any loss of income.
- Apart from this, the disposable surplus of Rs11.20 lakh can be invested in the following proportion every year for the next 25 years, until retirement.
- Invest Rs50,000 a month in a systematic investment plan of balanced (equity and debt)over the next 25 years. This will help create a corpus of Rs1.5 crore at cost (Rs4.72 crore in value terms if growth is aimed at eight per cent a year). This will help him in planning for his children’s marriage and retirement needs in full.
- A sum of Rs1.5 lakh be parked every year in a PPF yielding an assumed 7.6 per cent a year. Over 20 years this shall translate into a future value of Rs70.6 lakh. This money can be placed in a debt fund from the age of 55-70 years and systematically withdrawn for later on needs in life. In between the term , if required funds can be partially withdrawn for childrens higher education expenses.
- The EPF accumulation presently of Rs12.lakhs with funding at same pace, earning eight per cent a year and gratuity at retirement will fetch him about Rs1.25.cr at retirement.
- PPF at maturity can be used to buy an immediate pension policy at retirement. Bank deposits may be kept at bare minimum levels to meet contingency requirement for the next 15 years.
