I am 40 years old and plan to retire at 55. I have two children (12 and 8). I want a monthly income of Rs 50,000 in my retirement and I also need Rs 1 crore for my children's education. What kind of investments should I make?
Jayant R. Pai CFP and Head - Products, PPFAS Mutual Fund Responds: Assuming you live to the age of 80, earn an inflation-adjusted pre-tax rate of 1.88% per year, and do not intend to bequeath, you would need a corpus of Rs 1.20 crore the retirement day. Also, assuming you also need another Rs. 1 crore on the same day, you would have to accumulate Rs 2.20 crore over the next fifteen years. Assuming you already have savings of Rs 50 lakh, which earns a return of 6%, it will grow to Rs 1.20 crore by 2035. Now you will need to save approximately Rs 42,000 per month on a 6% pre-tax return up to age 55 years to accumulate the residual Rs 1 crore. Given the time frame involved, you may consider equities /equity mutual funds. Alternatively, long-term fixed deposits for high-end banks can also help by reducing the risk of reinvestment.
I got a home loan of Rs 28,000 at 9% interest from IDBI in March 2019. This was for a piece of land and building a house on it. The loan assigned to the land was disbursed and the remainder was disbursed in installments. I bought the land and planned to build a house in 6 months, which I couldn't do. Now, due to COVID, my financial situation is worse. According to the home loan policy, I must build a house within 2 years after the loan is released, or they will charge higher interest or some penalties. How can I solve this situation?
Raj Khosla, Founder and Managing Director of MyMoneyMantra.com responds: Your bank will ask you to close the land loan and face a penalty or continue with a higher interest rate. However, due to the pandemic, you can get a rest period by requesting to extend the construction period by 1-2 years. This will ensure that the EMI load does not increase immediately. Now you must provide the service only with interest, on partial payments for the purchase of the land. Once the construction amount is paid, the EMI will increase dramatically. As a first step, take advantage of the extension and use your allotted time wisely to realign your funds for construction in the coming months. Apply for a construction loan only when your cash crisis has subsided. Ensuring that the loan account remains standard throughout the period, keeping open the option to redeem the loan at a lower interest rate from another bank.
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