Mr Naresh Gupta was born in North India, but this 1973 batch IAS officer has worked his entire professional life in Tamil Nadu.
He has held several important posts under different governments in the state and is now the chief electoral officer of the state.
He is 59 years of age and is due to retire in a few months time. He and his wife are looking forward to a relaxed life. Their son, who is 32 years old, is married and financially independent.
FINANCIAL GOALS
The biggest goal of Mr Gupta, who is 59, and will be retiring in a month’s time and his wife would be to maintain their lifestyle post-retirement, which would require Rs 50,000 a month.
They plan to visit their son twice a year, which would cost Rs 60,000 annually. Besides, Ms Gupta likes pets, and she estimates that her hobby will cost Rs 1.44 lakh per year.
WHERE IS HE NOW?
Mr Gupta earns Rs 80,000 per month, but this will drop by 40 per cent once he retires. He can save Rs 20,000 per month from his current income.
He will be able to maintain the same saving from his pension as well. Subtracting the expenses from his income leaves a cash flow of Rs 3.6 lakh.
His savings also include bank deposits of Rs 7 lakh and accumulations in provident fund of Rs 25 lakh. His net worth works out to Rs 32 lakh. He also expects a gratuity of Rs 10 lakh on retirement.
Gratuity receivable at the time of retirement is not taken into account for net worth calculations. He owns the house where he lives, so no rentals are payable.
RECOMMENDATIONS
The Guptas have a contingency fund that covers their expenses for over an year and is adequate. Medical needs such as hospitalisation and personal accident are also catered to by the employer and bring a substantial saving. The overall financial gap for the Guptas is Rs 25.7 lakh in future terms.
A part of the bulk money recievable at retirement can be placed in:
n Immediate annuity plans without life cover offered by insurance companies.
n Corporate deposits with high ratings.
The monthly disposable income (MDI) towards savings and investments is Rs 20,000. 50 per cent of MDI can be deployed in debt mutual funds — such as monthly income plans and short-term income plans to earn returns in line with inflation.
Systematic withdrawls coupled with frequent dividends from these schemes can help in meeting goals such as going on vacations to visit their son and for meeting expenses of Ms Gupta’s hobby — pets.
Inflation is expected to pick up in the coming years, so the balance 50 per cent of the MDI can be deployed in two systematic investment plans in diversified equity mutual funds with long track record of earning above average returns to get a return higher than inflation.
The overall asset allocation inclusive of bank deposits and provident fund accumulations until now shall be 75 per cent debt and 25 per cent equity to yeild real returns post taxes and inflation.
We wish the Guptas the very best for their golden years!
(L. Ravindran is a financial advisor and managing director of Wealthmax Enterprises Management Private Ltd.)