SHUBH, 48 years
Profession: An NRI-based in the Bahamas,
Dependents: His wife, and two sons, who are pursuing higher education in India.

Net worth
Asset Current Value
Property Rs 1.5 crore
Cars Rs 14 lakh
Jewellery Rs 1.5 crore
Life insurance Rs 42 lakh
(maturing in 15 years)
Mutual funds Rs 12 lakh
Bank balance Rs 16 lakh
Total Rs 2.34 crore

Fund flow
Total income Rs 36 lakh
Household and other expenses Rs 18 lakh
Insurance premium Rs 3 lakh
Total expenses Rs 21 lakh

Financial goals (at current costs):
Retirement planning, that includes sufficient corpus to meet medical and health needs: Rs 3 crore
Net disposable income: Rs 15,00,000

Recommendations:
1 The potential for further savings is fairly high at about Rs 15 lakh per year for the next 12-odd years and there are no liabilities.

2 Interest on current bank deposits of Rs 16 lakh will yield about Rs 90,000 a year growing at a bare minimum rate of five per cent per annum on a conservative scale.

3 Investments in mutual funds of Rs 12 lakh over the next 12 years at retirement will translate into an amount of Rs 25 lakh approximately growing at 8 per cent per annum CAGR. This can purchase an annuity plan, which will provide lifetime annuities of about Rs 2 lakh a year.

4 Life insurance at maturity (of Rs 15 lakh approximately) can be used for buying another single premium immediate annuity, which can provide regular cash flows of about Rs 90,000 per annum to Shubh and his wife over their lifetime.

5 A medical and critical health plan for Rs 10 lakh, with total premium outgo of Rs 24,000 per year, each be taken for him and his wife, which will protect the family from expenses for hospitalisation and major illness for the next 17 years

6 Investment in Systematic Investment Plan in a few diversified equity schemes of Rs 6 lakh per year (Rs 50,000 a month) will help ease cash flows. Over a period of 12 years, the investment at cost will be Rs 72 lakh and Rs 1.3 crore growing at 10 per cent per annum.

7 A sum of Rs 6 lakh per year broken up as 60 per cent into a monthly income plan and the balance 40 per cent into a balanced fund needs to be considered. The schemes should lay emphasis on safety and liquidity over growth. This will help in aggregating about Rs 72 lakh at cost and about Rs 1.10 crore growing at six per cent a year conservatively.

8 At retirement, the funds on hand will be Rs 2.9 crore. The income to be earned as annuity and interest will be Rs 3.80 lakh, while dividends on mutual funds will be Rs 12 lakh per annum. This should be sufficient maintain lifestyle.

9 Shubh should create a Will in favour of spouse and ensure that all financial holdings have a nomination in favour of his sons to secure the assets. Overall, Shubh is on a good trajectory and a peaceful retirement 12 years from now is on the cards.

Assumptions:
(i) Longevity projected at 85 years and retirement age 60 when household expenses will drop and about
Rs 1 lakh per month will be sufficient to maintain lifestyle; (ii) Cost of living grows at 8 per cent per annum while earnings on savings and investments grow at 10 per cent a year.

(L. Ravindran, PhD, is a financial adviser and MD of Wealthmax Enterprises Management Pvt Ltd.
Readers can send their queries to youradvisor@ deccanmail.com)