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How much I should invest each month to build retirement portfolio based on my current monthly expenditure

I am of 30 year and currently a central government employee. I am having child of 3 months. I am under NPS with current value of Rs 5.00 lakhs. My monthly contribution include government towards NPS is Rs. 7550/- which is expected to increase Rs. 9000/- after pay commission. Monthly earning after all deduction:- Rs 42000/- (expected after pay commission- 49000/-), Monthly expenditure is Rs. 27000/- (including rented house @ Rs 8000/-), Invested in Axis Long term equity direct growth (SIP= 2000 from Dec-15), Retirement age 60 years, Life expectancy 80 years. After retirement to live in self occupied house. Please advise:- 1. How much I should invest each month to build retirement portfolio based on my current expenditure. Also suggest name of mutual fund along with investment break up? 2. How much and which MF combination I should invest each month to build child education portfolio for Engineering after 17 year?

Aug 3, 2016 by Mukesh Kumar, New Delhi  |   Financial Planning

The answer to your query is that you should get your financial planning done by some financial planner at Delhi as he or she will be able to take complete information from you, understand your risk profile and also the current asset liability position etc. This will help him or her to understand your needs better and then give you a plan which you should follow and review sitting with him or her at least once every year.

However, based on few of your questions, we have given below some simple answers which I am sure will help you when you make your financial plan.

1. Your current monthly expenditure is Rs. 27,000 and your age is 30 years. When your age is 60 years and you maintain the same living standard your monthly expenses would be around Rs. 200,000 assuming inflation of 7%

2. To get a monthly income of Rs. 200,000 from age 60, you need to build a corpus of atleast 3 Crores. Assuming that on this Rs. 3.00 Crores you can earn risk free return of 8% per annum

3. The current cost of obtaining a engineering degree is around Rs. 20 Lakhs. Therefore, after 17 years it should cost you around a Crore assuming the education cost escalation @10%

4. NPS – you are contributing Rs. 9,000 per month in NPS. After 30 years, the corpus of this fund should be around Rs. 3.00 Crores assuming 12% return. You can withdraw 60% of the accumulated corpus and draw monthly pension from the rest 40% of the corpus.

5. SIP – Currently you are investing Rs. 2000 through SIP in AXIS Long Term Equity Fund. If you continue this SIP then, in next 30 years you can expect a corpus of around Rs. 1.20 Crores assuming SIP returns of annualised 15%

6. How to meet the expenses of your child’s engineering study – Start another mutual Fund SIP of Rs. 11,000 in a diversified equity fund for 17 years. You should have a corpus of little more than a Crore assuming annualised returns of 15%. Check the performance of top diversified equity mutual funds here. Thus, you will be able to meet your child’s higher education cost.

7. Retirement corpus – to build the retirement corpus of Rs. 3.00 Crores just for meeting your monthly expenses, you already have a SIP of Rs. 2,000 (point no. 5) which will get you Rs. 1.20 Crores + from NPS you can get another Rs. 1.80 Crores (60% of total NPS corpus of Rs. 3.00 Crores). So you can create a corpus of Rs. 3.00 Crores from these two investments (refer point no.2). Therefore from this Rs. 3.00 Crores, you can have a monthly earning or around Rs. 2.00 Lakhs as discussed in point no. 2.

8. Therefore, your NPS contribution of Rs. 9,000 + SIP of Rs. 2,000, if both of these are continued for next 30 years, it can take care of your monthly expenses post your retirement. And, if you start the new SIP of Rs. 11,000 and continue for next 17 years then engineering education cost of your child is also taken care off!

9. Your monthly income can increase by around Rs. 65,000 – 70,000 from NPS annuity assuming that you get a return of around 7% on the remaining NPS corpus of Rs. 1.20 Crores (40% of Rs. 3.00 Crores of total NPS corpus).

Hope the abobe helps you greatly in planning your finances. However, you have just asked about the retirement coprus, monthly expenses and kids higher eductaion only. There are many more things in your life which might require financial planning from an early age. Some of these are, contingency fund requirement, your life and health insurance needs, if you have aged parents, how to take care of them? How to have your own house as you are currently living in a rented premises, your holidays and so on so forth.

For acquiring more nowledge about financial planning, you may go through our section on this topic https://www.advisorkhoj.com/articles/Financial-Planning

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