* Name: Uday Sharma
* Job: Private employee
* Age: 57 years
* Dependents: None
* Income: Rs 6.6 lakh/year

Name changed to protect identity

Fiftyseven-year-old Udayan Sharma is the manager of a pharmaceutical company based in Vizag. He will retire within a year. His wife is a school teacher. Their daughter — their only child — is married and settled in Germany.

Financial goals
Retirement planning, which requires Rs 90 lakh, is one of their goals. They also want to travel to Germ-any every three years to meet their daughter. This would involve about Rs 10 lakh for the next 10 years, aggregating to Rs 1 crore.

For the purpose of calculation, we have assumed that they would live till they are 85 years of age, and that the cost of living will grow at eight per cent per annum while earnings on savings and investments will grow at 10 per cent per annum.

Where is he now?
Mr Sharma lives in his own home valued at Rs 52 lakh and has a car valued at Rs 2 lakh. He does not have any liabilities. His annual income is Rs 6.6 lakh and expenses are Rs 3.6 lakh. Life insurance and provident fund contributions acco-unt for Rs 1 lakh per annum. Much of his savings are in deposits in nationalised banks worth Rs 16 lakh at eight per cent per annum.

Provident fund accumulation stands at Rs 13 lakh and will be worth Rs 15 lakh when Mr Sharma retires. Their net disposable income is about Rs 2 lakh per annum. Life insurance at maturity will translate to Rs 12 lakh receivable after one year. He gets a pension of Rs 12,000 per month from his ex-employer which will continue for his lifetime.

He bought a medical and critical health plan for Rs 25 lakh, which will pay for hospitalisation for him and his wife, and covers major illness for the next 15 years, the premium for which has been paid for life. His net worth stands at Rs 83 lakh. Contingency needs can be met from the current deposits which are sufficient to sustain them for a few years.

Recommendations
* Though the scope for further savings is low, Mr Sharma does not have any liabilities or major expenditure to support his dependents.
* His prime goal must be to protect the nest egg with a further objective to optimise and enhance the return by lowering reinvestment risk and having a trouble-free and secure life with regular earnings;
* The current household expense is Rs 30,000 per month. The bank deposits, pension and provident fund accumulations of Rs 31 lakh at eight per cent per annum will entitle Mr Sharma to an income of Rs 3.6 lakh.
* A single-premium pension policy can be bought with the maturity of the PF proceeds worth Rs 15 lakh. This will enable a monthly pension of about Rs 10,000 for the lifetime with no reduction in payout ratio and with cost escalation taken into account so as to reduce reinvestment risk and meet inflationary demands;
* About 50 per cent of the bank deposits of Rs 16 lakh can be retained as they are while the remaining can be broken up into two equal parts — Rs 4 lakh in a monthly income plan earning about eight per cent per annum tax-free and an equal sum can be invested in a fixed maturity plan or fixed deposit for three years earning 10 per cent annually. This will push up the income by about Rs 20,000 per annum.
* Life insurance maturity of Rs 12 lakh, which Mr Sharma would get a year later, can be placed in a bank fixed deposit in three maturity buckets of one, three and five years and utilised for foreign travel. Temporary loans can be av-ailed from these deposits.
* As a contingency measure, it is proposed that if larger sums of money are required at any later stage of life, reverse mortgage of their house can be considered. This is only when all other options have been fully exhausted.

(L. Ravindran, PhD, is a financial adviser and MD of Wealthmax Enterprises Management Pvt Ltd)