Nirmala, 65, is retired and lives independently in the temple city of Madurai in Tamil Nadu. She has two daughters, one married and settled in Mumbai while the second daughter is employed in the US. Her husband left behind a residential home worth Rs 80 lakhs, a car valued at Rs 2 lakhs, investments in stocks worth Rs 55 lakhs and bank deposits of Rs 50 lakh earning 8 per cent interest
Financial goals
Maintaining her current lifestyle besides travelling to meet her daughters once every 2 years which consumes all the earnings out of interest and dividends are the major goals. The assumed longevity is 20 more years and the total value of financial goals at current costs for the next 20 years is Rs 100 lakhs. Medical expenses shall be met out of recurring income.
Where is she now?
Dividend from stocks of companies held are unpredictable while interests are generally foreseeable. Household expenses are Rs 5.3 lakh per annum which is easily met out of the financial resources on command. Medical expenses require to be covered through foreclosure of deposits if the expense is major, or to be met out of interest and dividend inco-me accruing to the tune of Rs 6.5 lakh per year approximately. There is not much money available to deplo-yed to further supplement her income but overall Ms Nirmala is quite contented with her way of life.
Recommendations
Keeping the advanced age of Ms Nirmala in mind it is suggested that she keeps the ‘matters simple’. However, with the below mentioned plan of action an incremental earning of Rs 80,000 can be fetched by small juggling without compromising on risk.
* The shareholdings of Rs 55 lakhs may be maintained, after a due review with an expert, as to the fundamentals of the company. Dividend yields of 3 per cent pa is considered to be quite reasonable.
* Bank deposits may be withdrawn and placed for longer tenures to an extent of Rs 20 lakh to yield an incremental 1.5 to 2 per cent pa in private sector banks.
* Laddering of deposits may be done by placing deposits with differing maturities.
* Single premium pension policies help to lock in returns for lifetime, by foreclosing deposits worth Rs 10 lakhs.
* Leave the existing deposit of Rs 10 lakhs untouched at 8 per cent per annum.