Suresh is the director of a multinational company based in Dubai. His wife is a home maker and they have a daughter aged 16 years. His parents stay in India and are independent.
He is on a five-year contract and is on deputation from the Indian subsidiary and is entitled to a salary and retirement benefits in India. His company meets all household ex-penses in Dubai and pays Rs 5 lakh per annum as tax-free income for sustenance. His income from the Indian subsidiary is Rs 45 lakh annually. He is covered under the company’s provident fund, superannuation and gratuity fund. There are no loans availed till date.
Financial goals (at current costs)
His major goals are maintenance of the same living standard even after retirement. For which, he requires about Rs 1 lakh per month for the next 25 years, which equals to Rs 3 crore; He wants to buy a home in a gated community in India, which requires Rs 2.5 crore in a metropolitan city and would need Rs 2 crore for meeting his daughter’s graduation and post-graduation in Singa-pore. Assuming that Mr Suresh won’t receive pension and would live for 85 years, the overall financial goals at present costs work out to be Rs 7.5 crore.
Where is he now?
Currently, Mr Suresh has Rs 2.8 crore worth bank balance and investments in provident fund and stocks and equity mutual. His employer provides him a health cover for Rs 5 crore and a life cover for Rs 50 lakh. The funds in bank accounts are sufficient and provide room for comfort. For the next four years, he can invest Rs 45 lakh paid in India by his employer. Thereafter, he can save only Rs 12 lakh annually for the next 10 years. This leaves him with a sum of Rs 3 crore available for investment between now and securing retirement.
Recommendations
He need to take a new family floater policy for health insurance for about Rs 20 lakh. This will enable earning 5-10 per cent bonus for every year of ‘no-claim’, which can be utilised post-retirement when no medical benefit is available post retirement. The premium outgo will be Rs 50,000 per annum. He may take a job loss insurance.
For the next four years, when he can save Rs 45 lakh each year, he may invest Rs 3 lakh per month or Rs 36 lakh a year in an SIP. The balance of Rs 9 lakh per annum may be invested in a recurring deposit. Savings of Rs 12 lakh a year from the fifth year for the next 10 years out of employment in India may be invested in a balanced fund. The overall accumulations available at retirement will work out to about Rs 1.4 crore, which can be used for purchasing an annuity at the age of 60, which shall fetch an immediate annuity of Rs 12 lakh per annum, which will help him in meeting his standard of living costs as desired for lifetime. He must transfer Rs 1.25 crore bank deposits to higher return products.
(L. Ravindran, PhD, is a financial adviser and MD of Wealthmax Enterprises Management Pvt Ltd)