Expert Advice on Retirement Planning and Securing Your Child’s Financial Independence

Key Takeaways

1. Retirement Planning:

Aim to have at least Rs 10 crore at the time of retirement to maintain your current lifestyle.

Split your holdings into short-, medium-, and long-term instruments on retirement for best returns and safety.

Ensure adequate health insurance for yourself and your family.

Carry out estate planning to allocate funds for post-retirement goals and build a legacy.

2. Child’s Financial Independence and Health Insurance:

Create an ecosystem of financial instruments, a will, and a trust, along with a guardian and trustees to take care of your child’s needs.

Create three buckets of assets and investments based on the approximate timelines of your child’s needs.

Consider government-backed health insurance schemes for children with special needs, such as the Niramaya scheme.

3. Long-Term Wealth Building:

Evaluate your financial goals and determine specific goal values and the amount you need to invest for them.

Have a higher allocation to equities to generate inflation-beating returns.

Consider investing in mutual fund categories and increasing contributions to the PPF and VPF.

You are looking for advice on where to invest in order to retire at the age of 50. Additionally, you are also interested in securing your child’s financial independence and finding suitable health insurance for your child’s treatment and therapy. Let’s address each of these concerns separately.

Retirement Planning

Given your age of 45 and your current monthly expenses of Rs 1 lakh, it’s important to consider your current investments and future financial needs. Adhil Shetty, CEO of BankBazaar, suggests that you should have at least Rs 10 crore at the time of retirement to maintain your current lifestyle. With your current investments of Rs 6.5 crore in equity and Rs 1.85 crore in your PF account, you are well on your way to achieving this goal.

Assuming an annual return of 10% on your investments, you will be able to generate an income of Rs 42 lakh per year, or Rs 3.5 lakh per month, after retirement. This income is projected to rise by 6% annually to keep up with inflation. Given your current annual expenses of Rs 12 lakh after inflation adjustment, and if you can keep your costs constant, you are well past the 25 times income guidance (Rs 3 crore) cited for FIRE (financial independence, retire early). In fact, you have 75 times the suggested income, which means you can retire right away if you want.

To ensure the best returns and safety, it’s recommended to split your holdings into short-, medium-, and long-term instruments on retirement. Additionally, it’s important to have adequate health insurance for yourself and your family, and to carry out estate planning to allocate funds for post-retirement goals and build a legacy, if you are so inclined.

Child’s Financial Independence and Health Insurance

Raising a child with special needs, as in your case, requires both personal and professional assistance. Dev Ashish, Founder of StableInvestor, and Sebi-registered investment adviser, suggests creating an ecosystem of financial instruments, a will, and a trust, along with a guardian and trustees to take care of your child’s needs. He recommends creating three buckets of assets and investments based on the approximate timelines of your child’s needs. The first bucket should be for uninsured emergencies or large expenses over the next 1-5 years, and the money for this should be kept in bank fixed deposits or liquid funds. The second bucket can be for expenses for the next 9-10 years, which include education and medical support, and this money, depending on risk appetite, can be deployed in a mix of debt and equity instruments. The third bucket will be for long-term requirements, and it’s advisable to consider a sizeable allocation, at least 50%, to equity since the investment horizon is long and you need to beat inflation in order to build a large corpus.

As for health insurance, the government offers the Niramaya scheme, which provides affordable health insurance to persons with autism and similar disabilities. However, the cover size is limited to Rs 1 lakh and, hence, may not be enough. Among private insurers, there aren’t many schemes, but one is the Aadvik child insurance plan that offers a cover of up to Rs 4 lakh. However, it wouldn’t be prudent to rely on an insurance plan to completely cover medical costs, and hence the need for a contingency buffer in the first bucket.

Investment Advice for Long-Term Wealth Building

If you are 28 years old and looking for long-term investment options to build a multi-crore corpus, it’s advisable to evaluate your financial goals, determine specific goal values, and the amount you need to invest for them. Dev Ashish recommends having a higher allocation to equities to generate inflation-beating returns. He suggests investing in mutual fund categories like large-cap index fund, flexi-, large- and mid-cap fund, and mid-cap funds, along with continuing to invest in the PPF and considering increasing your VPF contribution in the EPF.

Conclusion

In conclusion, it’s important to carefully consider your financial goals, risk appetite, and investment horizon when planning for retirement and securing your child’s financial independence. It’s advisable to seek professional financial advice to create a comprehensive financial plan that takes into account your specific needs and circumstances.

FAQ

Q1: What is the recommended amount to have at the time of retirement?

A1: Aim to have at least Rs 10 crore at the time of retirement to maintain your current lifestyle.

Q2: What should be the investment allocation on retirement for best returns and safety?

A2: Split your holdings into short-, medium-, and long-term instruments for best returns and safety.

Q3: Are there government-backed health insurance schemes for children with special needs?

A3: Yes, the government offers the Niramaya scheme, which provides affordable health insurance to persons with autism and similar disabilities.