This article was published in Feb 1.

I am 35 and work in a private company. My wife is a teacher. Our daughter is in class 5. My mother receives a monthly pension of ?5,000 and has minor health issues. I wish to build a retirement corpus before 60. I have low life expectancy going by family history. I have ?2 lakh in EPF.

Rajesh

Thanks to the advances in medical sciences, life expectancy has improved significantly. Hence, to sustain the current standard of living till you turn 80, you need to build a corpus of ?3.3 crore, earning 1 per cent return more than inflation. Assuming 5 per cent increase in EPF contribution and interest of 8.7 per cent, your EPF kitty will be ?1.13 crore at the time of retirement. Save ?11,600 every month to meet the shortfall. You can also increase your EPF contribution once you repay the personal loan. Also, increase your term insurance cover.

Money back policy is not the ideal way to save for your child’s education given that the payouts are not regular. For instance, you may receive money when your daughter is 18, 20, 22 and 24 years old. You must plan for fee payments during the alternate years.

Your current estimate of ?5 lakh for your daughter’s education will be ?8 lakh after seven years, assuming 7 per cent inflation (same assumed for all goals). If you receive the same bonus on your money back policy till maturity, the investment will fetch you ?8.8 lakh. For second and fourth year tuition fees, save ?2,500 annually for the next seven years; the portfolio should earn 12 per cent annually. For your daughter’s wedding, you will need ?33 lakh (?15 lakh adjusted for inflation) 13 years from now. For this, you can invest ?6,000 in equity MFs, ?2,000 in debt and ?1,000 in gold.

The portfolio should earn 12 per cent annually; any shortfall can be met using the proceeds of your money back policy.