I am 57 and recently took voluntary retirement. My wife, 52, is a home maker. She receives rental income from her ancestral property worth ₹80 lakh. We have a daughter aged 25 who is dependent on us. We spend ₹20,000 every month on her medical and support expenses. We have a floater medical cover for ₹5 lakh for me and my spouse. I expect our life expectancy to be 80 years. Please suggest an investment plan with tax planning tips so that we can live comfortably and leave some estate for our daughter.
Vasudevan
Without equity exposure, it will be a challenge to meet your targets. There are two challenges that will need you to generate higher returns.
First, your current retirement corpus of ₹70 lakh is well short of your needs. Second, you cannot predict the life expectancy of someone who needs regular medical attention. If your daughter lives till 80, you may need to appoint a guardian, and to meet the expenses you may need to sell ancestral property.
Coming back to your retirement corpus, the rental income of ₹25,000 will help you partially meet your monthly expenses. Since the ancestral property is an old building, the rental appreciation may be lower than the inflation rate and the gap will widen over the years. To meet your monthly expenses until your wife turns 80, you need to have a corpus of ₹87.5 lakh and it should earn higher returns than inflation.
With a corpus of ₹70 lakh, to get to your target , you need to earn returns that are at least three percentage points over and above inflation. To do that you need to invest in equity.
Since you are a conservative investor, you can invest 20-30 per cent of the assets in mutual fund schemes. Put money in a fund that predominantly invests in equity and reduces volatility in its portfolio with investments in debt.
Such funds will deliver returns higher than inflation with downside protection as well. Use the systematic withdrawal option to meet the monthly expenses if you meet with a shortfall in the interest income. You can sell the ancestral property later and appoint a guardian or trustee to manage the proceeds as long your daughter needs it. Since you have a floater health policy for only ₹5 lakh, buy a super top-up plan for another ₹5 lakh.
The writer is a financial planner and founder myassetsconsolidation.com
This article was originally published in The Hindu Business Line on on February 15, 2015
