A reader says, ” I am a salaried IT professional, but I have only started planning for retirement very late. I am investing very strongly (35% into investment, 30% into EMI), but I fear I might not have a safe retirement – and am too late. I want to keep my expenses the same after retirement. Please advise. What steps should I plan? Should I consider reducing monthly spending now rather than later? And you know, in IT jobs, job safety is not guaranteed in the long run. My financial details are as follows.”
- Age: 45 years old – living in Bangalore
- Yearly earnings: 50 Lacs per annum (Single income)
- Monthly spend: 85 thousand approx
- EMI for a house: 75 thousand per month, will finish in 2035. The house valuation is about 1.5 Cr.
- Savings so far: 55L in Mutual funds, 5L in FD, 25L in provident fund, etc.
- Monthly savings/investment: 80 thousand approx (50 thousand for retirement, and 30 thousand for son’s education- 8-year old, will go to college in 2034)
- Invested in SIPs:
- Investment for Retirement:
1. SBI Nifty Index Fund – 20K
2. ICICI Pru Next 50 Index fund – 10K
3. SBI Nifty Midcap 150 Index fund – 7.5K
4. ICICI Pru Nifty Small cap 250 Index fund – 7.5K
5. Invesco India Contra Fund – 5K - Investment for Son’s education:
1. ICICI Pru Nifty 50 Index fund – 30K
- Investment for Retirement:
Instead of thinking about whether you are too late, it is better to focus on the positives. You can still work for at least another 15 years. It may not be as a salaried employee, but you can use your expertise and skills for consulting and freelancing.
Step 1: Ask yourself how you can turn your skills into income. Plan for a second inning right away. This will play a crucial role in how comfortable your retirement is.
Step 2: Consult a SEBI-registered flat fee-only financial advisor for a holistic financial plan. You can consult one from our curated list: List of Flat Fee-only Financial Planners in India (SEBI RIAs).
These two steps will give you peace of mind and clarity on the way forward. Allow me to make some observations and suggestions.
- The valuation of the house you live in should not include your net worth unless you are ready to sell it.
- Yes, you should immediately decrease your expenses – especially discretionary expenses.
- You should also not increase your lifestyle going forward.
- Your take home (post-tax) is close to Rs. 3 lakhs. So, I think you have some room left to increase investments. In any case, you must increase investments as much as possible.
- To be safer, aim to work until age 65 – this is why step 1 is crucial, as salaried employment will be difficult beyond 55 in your industry.
- We recommend an asset allocation of 40-50% equity for the next ten years.
Focus on the time left and how to optimise it. With some sacrifice (time, effort, lifestyle), you may be able to retire comfortably.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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