[am1m]

Originally Posted by am1m

This was followed up with calls to get more details. The actual financial planning stage will start after this stage.

So the financial planning stage with the professional financial planner has started. Just had one initial session, a few more to go. He's already suggested some changes in the portfolio that I'm not entirely convinced about. It would seem that these planners have a template that they want to stick too. Not sure that is what I am looking for. Will course correct during the next session.

On a different, but related note, I was looking at the website of my old college, saw the fee structure and it would seem that for the same degree that I got about 20 years ago, a parent would now have to shell out 12 times that amount. I know the price has increased for education, but 12 times seems rather more than just simple inflation? I checked with some inflation calculators online and doesn't seem to add up. Like I posted on another thread, it would seem to be that people are working harder than previous generations now to spend more and just to maintain the same quality of life.

[terra85]

Very good thread. I invested in a ULIP in Jan 2021, at that time it was tax free and I invested 6 lakhs a year , within a week they changed the rules and made taxation above 2.5 lakh mandatory. Now older and hopefully wiser I thought I need to pull it out, I had changed to pure equity hence its generated decent returns and with LTCG being increased to 12.5 and possibly may increase further, I felt it's best to leave it as is .

SBI whose ULIP it is will add interest for continuation. Hence if anyone has invested in a ULIP please change to maximise your equity holdings. I wouldn't recommend anyone to pick it up but I guess no need to beat yourself to death either. Make sure its in the right sector that's all.

Questions:
1. Is this the way the policy works?
2. What would be the right course of action here? My thought is to go with the option#2 here

P.S: We realized that investing in this policy is a mistake after investing and hence, we could not go back. Now, please do not start the topic on "Why did you do?" part. Need your help on coming out of this with relatively lesser loss.

Thanks!

Don't stop it now , all 8 years will be wasted. A mistake will become a blunder. Now finish the payment and think it's a mutual fund. Read policy document properly. If discontinued it gets converted to a discontinuation fund . My advice is to complete the payments and access after 2 years. If he's invested for 8 years it will be tax free as well.

[Asish_VK]

Originally Posted by SmartCat

But the biggest advantage is that your money is held in prison for XX years, which you won't be able to take out. Compounding effect over such a long period can result in large payoffs at the end, despite the higher charges. The maturity amount is tax free too I think, unlike a mutual fund.
-

+1 to this.

When I started working, my dad forced me into a LIC Jeevan Anand policy (He was forced into it by an LIC agent friend of him). It is a policy for 10Lakh with 20Year payment tenure (Premium of 12500/Qtr). Payout of ~20Lakh at 21st Year and continuing 10Lakh life cover till death.

It was very hard to pay the premium at the beginning considering I was getting just Rs.8000 per month as salary. Thought of stopping it many time but kept paying it till now. In another 3 years, I will be completing the payments and guaranteed wested bonus stands at 7.8Lakh. So I am expecting I'll be getting close to 20L in another 3 year.

Looking back, I feel that amount being locked away was a blessing

[am1m]

Originally Posted by am1m

Not sure that is what I am looking for. Will course correct during the next session.

Had a couple of sessions more where we crunched some numbers. Tried to see how feasible it would be for me to retire in x years, x+5, etc.

So my initial retirement age target does not seem feasible, I'll need to add 5 years more to that. Had pretty much arrived at the same conclusion before, but the objective of this exercise/engagement was to get the numbers looked at by a professional.

Overall, quite happy with this 'fee-only' financial planner engagement. Thanks to all who recommended this approach earlier! Absolutely no financial products were pushed by him, just advice on percentages, amount allocation, and asset classes. No specific financial products or brand names were recommended, so no chance of any commission on his behalf.

[akhil_007]

Recently had a small get together with old friends and during the banter, the topic of retirement came up. One of my seniors had an interesting dilemma. So his situation is like this:

-Family Situation-38 years, Married with 2 kids- Son(7) and Daughter(3).
-Current Cash in hand/Savings- 2 crores (excluding PF)
-Current Combined Income- Around 3 Lakhs per month
-Expenses- Around 70k per month(including rent)

He is at a stage where he can afford to buy a home/flat fully cash down. Maybe take a loan of 10 or 20 lakhs. And he has entire cash in hand will be emptied. For his retirement, he can start saving every month going forward and that will be his retirement corpus.

Now he posed us a question asking if this is a better option OR he saves some more and uses that money buying a home(let's say 20% down payment and rest is loan). So capital is saved. What do would you guys do?

[shankar.balan]

Originally Posted by akhil_007

Now he posed us a question asking if this is a better option OR he saves some more and uses that money buying a home(let's say 20% down payment and rest is loan). So capital is saved. What do would you guys do?

The passage of time eats up the value of money.
Rs 1 Cr today is like what 15 lacs was, 15 years ago.

[SmartCat]

Originally Posted by akhil_007

Now he posed us a question asking if this is a better option OR he saves some more and uses that money buying a home(let's say 20% down payment and rest is loan). So capital is saved. What do would you guys do?

When in doubt, take the middle route!

So, optimum solution for him would be to take Rs. 1 cr home loan and put in a downpayment of Rs. 1 cr.

[Eddy]

Home loan is the cheapest form of debt available. I would (and have) used it to the max extent possible.

If he maxes out the home loan and invests the capital in hand reasonably prudently, he will be net positive. The only caveat - where will LTCG taxes eventually settle down?

[subincb]

Most people think retirement needs lot of money. And most are discussing or planning on making more and more of it and insurance and things like that etc. Hence we see most people dying rich, almost all life striving for building huge mansion, making lots and lots of money and assets. Many times kids don't even need it.

So I have a different opinion or view towards retirement. Firstly ask why retire? To travel and do more and more things in life better not retire. If one wants to do more in the world better to do it whilst working. Atleast there is a routine on weekdays. Want to travel, better travel during vacations. All the time we have from birth to death is easily spent working.

So when and why to retire? The following questions may be asked. Are we ready to live simple life, not doing many things or achieve so much extra in life, not own huge mansion or big cars etc.? Is one sure of how to spend all the free time available happily and without getting depressed?

There is going to be lot of time available and if we want do new this and that like shopping at high end malls, world tour etc better do it while working. If it's simple hobbies like walking reading etc then it's good. Are all expensive unnecessary desires fulfilled? Do we know that the surest thing to happen to me is death and no insurance can save me or anyone from that? Have we practiced enough living a retired life while working? Do my dependents accept laid back way of life I am setting with limited resources? If all these are positive one can retire.

We will adjust expenses based on what we have. For example, one who has no desires and no money no dependents etc and still wants a retired life is almost if not a sanyasi. He can even beg and be happy in life without doing anything so money is not the criteria. Family people cannot be like that and needs more based on what you define is a need.

Money requirement is based on what one wants to do after retiring. Want to do too many things better not retire. Want to start business, thats not retirement. Minimal things like live life and basic education for kids with simple way of life and most importantly routine (absolutely ready to stick to routine) then don't need lot of money. Start practising the routine and will be very easy to retire.

If anyone wants to retire so badly and is stuck by money thoughts please know that no bird or monkey or most animals in the wild knows where it will get food tomorrow yet sleep in peace. Almost all is fed except ones whose destiny is to starve by nature or almighty or what ever one wants to call it.

[akhil_007]

Originally Posted by akhil_007

Recently had a small get together with old friends and during the banter, the topic of retirement came up. One of my seniors had an interesting dilemma. So his situation is like this:

Originally Posted by SmartCat

When in doubt, take the middle route!

Originally Posted by Eddy

Home loan is the cheapest form of debt available. I would (and have) used it to the max extent possible.

Thank you for your replies. Shared this on our whatsapp group and this has given clarity to the person concerned(the percentage breakdown might vary).

I haven received few more questions from people sitting on other side of the fence. Posting it here to get your opinions.

There are many folks who have been working since 10-15 years. They have invested all their savings and utilized home loan to buy/construct a home. Most of their salaries are going towards EMI, Kids Education, Household expenses leaving very little room for savings so far. Fortunately they will able to close out the home loans in another year or two.

The question is- Is it too late to start for retirement savings + kids higher education at around 40 years of age?

Thanks in advance

PS: Any anecdotal/personal experience are also welcome since I will pass it on as an motivational scenario

[Samfromindia]

Originally Posted by akhil_007

The question is- Is it too late to start for retirement savings + kids higher education at around 40 years of age?

Like the famous quote says, its never too late You will just require more years to achieve your target investment corpus.

For most people working out of hometown/parental home, renting makes more sense than buying unless you are planning to settle down in another city. Also its all about choosing your priorities. Like I prefer to stay in budget properties where rent is less than 10% of my monthly in hand cashflow and spend more on travel and experiences. Currently its less than 5% I think if I account my wife's pay.

Your friends have done a good job so far accumulating 2Cr with current monthly cash inflow of 3L, assuming 10-12yrs of employment.

[Rajeevraj]

Originally Posted by akhil_007

The question is- Is it too late to start for retirement savings + kids higher education at around 40 years of age?

The positive aspect: It is never to late to start. So better to start at 40 rather than 50 or not do it at all. The 2nd positive part: If these people are in good jobs with a good growth path, then they can aggressively save while keeping up/improving lifestyle/standard of living.

The negative points: Not saving at all means that a lot of years of investment have been lost and you lose that power of compounding. Secondly, if these people are in regular tech jobs with no niche skills, then the 40s can be a bad place to be. There is a whole thread on the difficulty for people to get new jobs once past 40, the general downturns in the IT sector leading to layoffs, AI stealing jobs.. the list goes on. Such people may be in a tough situation.

[Ananthang]

When we plan retirement corpus or monthly expense, I was thinking we will not have a home loan emi, nor house rent that I have to bear in future. Similarly no school fees, even hotel, food, vacation and travel expense will be less. Today my current expenses include all this. So when we calculate expenses, should we remove these items and add a slight premium for Medicine expenses and medical insurances. Almost 50% of my income goes to EmI, School fees.
So if I earn 2L monthly and can I assume my monthly expense is 1L and build /plan corpus based on that.

[am1m]

Originally Posted by Ananthang

Today my current expenses include all this. So when we calculate expenses, should we remove these items and add a slight premium for Medicine expenses and medical insurances.

It's a valid point that the expenses at retirement might be lesser than when we are younger, earning a salary, and spending on a younger family.

But don't discount medical expenses. As we get older, the more serious, life-changing medical issues can come up.

Also, be aware of lifestyle creep. When we earn salaries, we get used to spending a certain way. And those habits are hard to break.

Today I am ashamed to say I don't know the price of several common grocery items. It just doesn't make a difference to me, I just take care of the final bill. Things like 150 bucks for a coffee at a 'nice place' (in a city where you get the best filter coffee for 20-30 bucks in any neighborhood!), just become normal. I think I need to be more aware of my spending habits, especially if I want to retire early.

[SmartCat]

Originally Posted by Ananthang

When we plan retirement corpus or monthly expense, I was thinking we will not have a home loan emi, nor house rent that I have to bear in future. add a slight premium for Medicine expenses and medical insurances.

Right. That's why most of the material about retirement planning is misleading. You cannot predict your post-retirement expenses based on current expenses and inflation rate.

However, all these calculations help indirectly - by scaring people into saving & investing money .

So the answer to the questions "how much to save" or "how much to invest" cannot be found in an Excel sheet or an online calculator. The correct answer is "as much as you can" for both the questions. If final retirement piggy bank is worth Rs. 2 cr or Rs. 5 cr, you will eventually figure out a way to live within those limits, simply by adjusting your lifestyle.