HOW TO FIND THE RIGHT RETIREMENT NUMBER AND CONSTRUCT PORTFOLIO?

Hi folks

Do not assume a unreasonably higher number as your retirement corpus and work hard till eternity.

Do your maths and get things in place.

Retirement Number is not difficult to achieve.

Important thing today is to work on increasing your skills and active income:-

1. Salary

2. Bonus

3. Stock options

"Then save and Invest."

Now let's see how to find a retirement number?

Lets say your annual expense after 15 years would be 60 lacs p.a.

So you need to have 10 crore corpus in Equity ,MF and Ulip after 15 years to withdraw 60 lacs per anum. .

Considering long term annual inflation 6%(60 lacs).

Annual withdrawal 6% (60 lacs).

And annual growth 12%.(1.2 crore).

Summary of steps to be taken:-

Step 1 :- over the period of 15 years generate 10 crore corpus.

Step 2 :- After 15 years withdraw 5-6% corpus.

Step 3 :- Invest your corpus where it grows @ 12%p.a.

Now this 10 crore will generate 1.2 crore p.a. and you will withdraw inflation adjusted 60 lacs p.a.

YOUR RS 10 CRORE WILL BE INTACT.

Now the question is:

How much to save?(Annual savings)

Where to invest? (Portfolio allocation)

Let me help you with 3 approaches.

1. AGGGRESSIVE APPROACH.

Invest in equity, mutual funds, ULIPs.

An investment of Rs 15 lacs p.a. for 15 years in any of the above products would help you create a corpus of around Rs 8 crore which will pretty much help you in achieving your goals.(considering 14% p.a. return)

Now the important questions are:-

Are you are willing to invest all your savings in equity market based products, considering market falls, uncertainty, geo politics, macro economic factors, wars and what not?

Do you have patience to invest for next 15 years?

Can you control your emotions on market Ups and down?

Remember Magic of compounding happens only in long term.

2. MODERATE APPROACH

Allocate your portfolio in equities and debt based upon your risk appetite.

Let say you invest 5 lacs in ulip and 10 lacs in debt.

So your cash flow after 15 years would be around Rs 40 lacs p.a. with corpus of Rs 2.5 crore.

Alternatively,

you can invest 10 lacs in ulip and 5 lacs in debt.

So your cash flow after 15 years would be  around Rs 

50 lacs p.a. with corpus of Rs 5 crore.

3. CONSERVATIVE APPROACH

This is only recommended for wealthy people who are not dependent on these cashflows for their sustenance.

They primafacie invest in debt and preserve their capital.

Construct your portfolio according to your risk appetite.

WHAT NEXT?

Choose the approach that best suits you and Plan your retirement.

Remember F.I.R.E is the new gold.

(Financially Independent Retire Early)

Once you decide to retire at say 50 you will end up saving 30-35% INCOME TAX and rental expense, if any.

This is a significant reduction in cash outflow, which most of us fail to acknowledge.

#Learnwithcaakshatmodi.

#F.I.R.E.

#Retirement Planning.

MY FINANCIAL PLAN - A STEP TOWARDS FINANCIAL FREEDOM.

Hey guys

I hope you all are doing great in your career and life. Many times people wish to have a secure future and are willing to save and invest for it, but lacks direction.

Where to start, what to do, how to invest are the questions which remains unanswered and hence they fail to begin early.

By this article I would like to highlight my financial plan, so that people might get an idea of where to start and set priorities to have a financial plan.

This financial plan would be most relevant for persons fulfilling following criteria:-

1. Age – 28 Years.

2. Income – Rs.1.25 lac per month after tax.

3. Not sole earning member in family.

4. Have exposure in mutual funds and Equity.

So let's get started

I have divided the financial plan in 3 categories which will act as a checklist for persons who have not yet started their financial planning.

1. Health insurance.

2. Life insurance.

3. Investments.

 

1. Health insurance

70% of Indians are just 1 medical bill away from poverty. This statement has a serious gravity only if one understands it well.

Needless to say, health insurance is the need of the hour, and since we have seen the deadly covid -19 pandemic just 2 years before, everyone must have encountered with at least one situation in their close circle if not more, where the person in need borrows money for paying the bills of hospital. (Mortgage of gold, house is quiet common in these situations)

So why should one indulge into such situations, if he can pay a small premium per anum to get insured against this fearful situation.

I had bought my health insurance policy from Care Health Insurance in March 2019 for 3 years at once for Rs 12,234/-.

Later in March 2022 got it renewed again for 3 years till March 2025 by paying premium worth Rs 20,943/-.

Paying premium for 3 years at once allowed me to save 10% extra as companies offers these discounts for bulk payment. An added advantage is that I am spared from paying increased premiums for next two years as companies has increased premiums by 10-15% in 2022.

What does my policy covers?

Sum insured - 5 lacs

No claim bonus - 150%

Room rent - no capping single private ac room

Free annual health checkup (costing approx 2000)

Health insurance companies have a waiting period of 2 to 4 years for preexisting diseases(PED).

Meaning if a person is already taking medication of heart related diseases, his claim for heart attack  will not be settled by company if it's in waiting period.

One can reduce the waiting period by paying some extra premium. So what one should do to get hassle free claims?

Buy health insurance today AND disclose all existing diseases, pay some extra premium but have a peaceful sleep at night.

What is no claim bonus?

Since I have not claimed any claims from the company in these years, company offers me enhanced sum insured of 12,50,000(150% of 5,00,000) instead of 5,00,000 for future.

So I am insured to the tune of 12,50,000 but paid premium for 5,00,000 only. This is an added advantage for being loyal to the company.

Medical inflation is approx 15% p.a in India and is expected to grow at this rate for next 5 years.

By buying this health insurance policy, me and my family is financially secured from any unforeseen emergencies of hefty medical bills.

2. Life insurance

Death and taxes are the only things certain in life.

Why should one buy life insurance?

When you are alive, your family is dependent on you for financial needs, but in case of death especially at an early age, family is shattered not only emotionally but financially as well.

Having a life insurance policy helps your family to cope up with this financial crisis and maintain same lifestyle expenses while you were alive even after your death upto a certain years till the age when children completes education and are mature enough to earn by themselves.

Having a term plan can significantly help in dealing effectively with such situations.

If a family's yearly lifestyle expenses is 6,00,000, then a term plan of 1 crore can serve the family for next 15 years considering inflation and if properly invested can serve for more than 15 years also.

I have purchased a term plan worth Rs 1 crore from Bajaj Allianz Life Insurance company. The details of the plan are as follows:-

Outflow – Rs 23,156.32/- p.a

Tenure  –  20 years (Premium paying term)

Total Outflow – Rs 4,63,125/- in 20 years

Insured upto age 85 years.

(If I die before 85 years, my family will get Rs 1 crore)

Policy term – 58 years (85 -27)

27 was my age at the time of buying the term plan.

One may choose a shorter policy term of 48 years, where in he will be insured till the age of 75 years.(premium will be slightly less).

 

3. Investments

 I have started investing 20000 per month in ULIP, which can be termed as tax free mutual funds along with insurance benefits.My goal is to make my 1st 1 crore Rs and investing Rs 20000 per month for next 15 years would help me acheive that goal.

  

SUMMARY :-

 1. Have a adequate Health insurance cover to cater for medical emergencies. I have bought my health insurance policy  for Rs 5 lacs 4 years back and now its worth 12,50,000 thanks to No claim bonus facility.

2.  Have adequate Life insurance cover as a backup for your family’s financial needs, when you are gone. I have bought a term plan at age 27 for Rs  1 crore  by paying annual premium of Rs 23156 fixed for next 20 years and insured till the age of 85.

3. Make a goal and alight your investment to acheive that goal. To acheive long term wealth creation one should invest in equity linked products. Start investing early if possible from today. Start with 20k per month, if that's too much go with 15k or even 10k. But start investing you will be amazed to see the benefits of compounding in the long run.

As and when the income increases, one should again reassess the financial needs and plan again for further investing in asset class which best suits you at that particular time.   

Further Consulting a financial advisor is highly recommended.

If you need any help regarding financial Planning or have any suggestions  feel free to contact us at 9028912025 or email @ caakshatmodi@gmail.com.

 

 #retirement#retirementplanning#investment

#financialplanning#early retirement

 

Disclaimer :- This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or financial advice. You should consult your own tax, legal and financial advisors before engaging in any transaction.

 

FINANCIAL FREEDOM OR EARLY RETIREMENT - WHAT, HOW AND WHEN?

 Hello everyone,

Gone are the days when people use to retire at 60, with a limited corpus. This young generation wants financial freedom at young age. The life of our earlier generations was full of responsibilities. Sacrificing self-desires for betterment of family. 

We can broadly classify the lifestyle of Previous 3 generations after independence as follows-

1947-1977

Majority people of this generation suffered extreme poverty. Their only desires were the basic necessities Roti-Kapda-Makan. Some of the people were privileged enough to get higher education and a decent paying job.

But majority people were left  with no proper working conditions, Sethji employers, minimum salaries, no holidays, exploitation, low self-esteem and what not..

This generation learned the lesson of Hard work and Value of money the hard way.

Disagreeing with employer or saying no for a particular work was never thought of by employees back then.(family responsibilities)

 

1978-1997

People of this generation were provided with basic mandatory education. Globalization and liberalization opened gates for both business and education to a great extent.

With sheer dedication and hard work, people excelled in their life. Big business, industrialization, IT reforms etc. left no stone unturned for growth story of India. People now have the basic necessities but didn't have the luxuries.Again family responsibilities, building a house, providing good education for children, savings for emergencies were the top priorities.Maintaining good relationship with employer for career growth was mandatory, switching jobs was not easy, disregarding employer still not very common.(job security, career stability, family responsibilities)

Planning for retirement for self desires was still not the cup of tea for most of the people.

 

1998-2022

Majority people of this generation has the basic necessity and a privilege of sound education. Access to low cost internet facility, financial education, paved the way for a civilized society. Startup culture, desire to earn more money, fame, luxury is the latest trend. People nowadays want a healthy work environment, work life balance, handsome salaries, growth and mental peace above all.Bullshit of employers are no longer tolerated, job switches are comparatively easy.

Up skilling with latest technologies, good communication skills and networking are the new age necessities.

To cut the long story short, people nowadays are smart enough to earn for the necessities and work for luxuries.(financially sound and independent)

This generation works and save for self desires, vacations along with family responsibilities. This young generations’ plan of retirement is also quite different.

Let’s understand this in following manner:-

Mr Saurabh's age is 30 and is earning 1 lac a month.

He has two options to plan his retirement.

1. Save 10000 per month and invest in equity market based products for next 30 years and have a corpus of Rs 3 crore at the age of 60.(assuming 12% return per anum)

Or

2.Save 20000 per month and invest in equity market based products for next 15 years and have a corpus of Rs 1 crore at the age of 45.(assuming 12% return per anum)

Let me know in the comments which option will you choose?

Both the options are good, and one can choose according to his comfort. But majority of the younger generation is inclined towards option 2.

Having a corpus of 1 crore at age 45 means you can withdraw 1 lac per month and keep the corpus intact and growing.

If you can sustain on 50,000 per month today, you can meet your basic livelihood with 1 lac a month after 15 years, considering inflation rate of 5% p.a.

 

Here Focus is not to retire at age 45 and sit back at home and relax, but to have financial freedom, ownership of time, pursuing your hobby, making your hobby your active source of  income (latest trend), living a meaningful and content life, spending quality time with family and list is never ending.

Basically “Do what makes you happy”

So what's the point I am trying to make here.

By the passage of time salaries increment, career growth and switches are bound to happen. One should not hesitate to start a sip of 15000 to 20000 if you are earning 1 lac per month.

You need to start investing early and also a handsome amount(15-20% of your salary) in order to retire early and have a financial freedom.

A proper financial plan and goal based investing is the key for happy retirement and mental peace.

One should have a provision of emergency funds of at least a 6 months’ income. Provision for vacation, education is always recommended.

Summarizing the topic What, When and How of financial freedom and early retirement:-

 

What-Relying upon passive income after a certain age for basic necessities, rather than actively working for the same is the essence of any effective financial retirement plan.

 

When- Investing from an early age of 25- 30 years is the best time to start investing for retirement.

If you missed the bus, start today.

The best day to start your retirement planning is first day of your career, the next best day is "TODAY".

How- Build a balanced portfolio, have exposure to equity market, Reits, gold, guaranteed investment products, insurance. Focus on inflation adjusted, tax adjusted returns and cashflows rather than per anum returns in % terms.

“Give time to your investments, rather than timing your investments.”

 

Food for Thought:-

Equities today may be ok if one is starting a small SIP but may not be ok if one has a large Lumpsum to invest.

Equities may be ok for a young person but may not be ok for an elderly person.

Debt may not serve its purpose for a poor man but may be perfect for a rich man

A Financial Strategy is like making tailor made clothes which fit you perfectly well.Quality of fabric is content but if it does not fit you then it serves no purpose because it is out of context.

Therefore when it comes to your Investment never compare your strategy with that of others because your context and theirs are different.

What is a good investment' has no answer without understanding the context.

The role of an Advisor is to provide decent returns for his clients but the most important role is to manage and mitigate  risks involved in investing. 

Don't be in a rush to choose the investment product giving maximum returns, but  have a balanced exposure based on your risk appetite and mitigate your risk.

Consulting a financial advisor is highly recommended.

 

If you need any help regarding financial Planning or have any suggestions feel free to contact us at 9028912025 or email @ caakshatmodi@gmail.com.

#retirement#retirementplanning#investment#financialplanning#early retirement

 

Disclaimer :- This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or financial advice. You should consult your own tax, legal and financial advisors before engaging in any transaction.

 

 

EFFECTIVE FINANCIAL PLANNING FOR A HAPPY RETIREMENT

Hello everyone..

I hope you are doing great in your career and life.

I had been dealing with many IT professionals, doctors' businessman income tax returns and managing their finances since more than 6 years now and what I found was, that despite of earning handsome salaries or business income they lack long term wealth creation attitude or don't have any effective  retirement plan.

Most of them have parked their money either in Savings Account, Fixed Deposits, PPF, equity shares(bleeding portfolio holding stocks with emotion, no stop loss!) or Mutual funds but alignment with future goals is majorly missing.

They are excellent in their area of work, but lack the skills needed to manage their finances or making their money work for themselves effectively.

So Akshat, what exactly is effective retirement planning?

In order to  understand what retirement planning looks like, sharing the snippets of the successful financial planning call suggested and closed last week by our team.

1. This Couple is  working in Noida in IT and sales field respectively.

Income of husband is 32 lacs and age is 32 years.

Income of wife is 18 lacs age is  31 years.

Annual family income.   50 lacs

Income taxes paid.         10 lacs

Net in hand income.       40 lacs

Expenses.                        30 lacs

Annual savings               10 lacs 

(Details of expenses :- Car loan emi 25k, housing loan emi 60k, mutual funds and other investments 25k, house hold expenses  1.4 lac all per month)

Total 2.5 lac per month, annually 30 lacs.

2. What we suggested?

     A) Invest Rs 8 lacs per anum in a pension plan for 12 years, wait for 2 years and from 15th year receive 13 lacs per anum for next 25 years as pension.

                                                            and 

on 39th year receive back 98 lacs initial investment (Rs 8 lacs paid  for 12 years) guaranteed money back.

If we sum up the benefits of this investment,

IRR is 7% p.a. tax free.(outflow-inflow)

Insurance cover from day 1 of Rs 1 crore.

These are guaranteed returns with no alterations whatsoever.

Total outflow of funds is Rs 98 lacs and Total inflow is Rs  4.19 crore.

Net gain over the year is 3.2 crores.

   B) Invest Rs 2.4 lacs per anum in equity market linked product for 15 years.

IRR is 13 % p.a. tax free 

Insurance cover of Rs 24 lacs from day 1.

out flow in 15 years is Rs 36 lacs and expected inflow after 15 years is Rs 1.2  crore.

Note:- In Equity Market based product, returns are linked to performance of Indian stock Market.

   C) Apart from these investments we advised  some income tax saving instruments which was the cherry on the cake.(annual tax saving of Rs 25,000 on interest income from Fixed Deposits)

By mixing the guaranteed return product and market based product we have mitigated risk  and returns and this is commonly known as portfolio balancing.

Initially the client was hesitating to commit such amount of Rs 8 lacs p.a. for 12 years. But eventually he understood the importance of goal based investing and made a good financial decision.

At present also he had a corpus in FDs mutual funds etc (approx 20 lacs) but the alignment with future requirements was missing which is the crux for any sensible investing.

We are currently working on a retirement plan for a IT couple having annual income of 60 lacs and suggesting for investment of Rs 10 lacs p.a. in pension plan for retirement and 5 lacs p.a. in equity market linked product.

I hope you understand the basics..

So here I wish to present myself as a financial doctor to better your finances and help you to create long term wealth and a effective retirement plan.

If you  want to effectively plan your retirement I can surely demonstrate a presentation on google meet that will definitely change your horizon on how you look at investment, insurance and money.

Contact at 9028912025 for more details.

Happy reading!

#investment#financial freedom#early retirement#retirement plan.

#think twice#act wise.