ET Wealth: Family Finances: How late starters can build for retirement
* They own two houses, but plan to buy a third one next year.
* Almost 19% of total monthly income gets exhausted in paying insurance premium.
* Concentrated stock portfolio with 92% of investment in one stock.
Should Patris take fresh liabilities on the verge of retirement?
It seems to be a poor trade-off: buying a new home as an investment in exchange for a comfortable retired life. This is what the Mumbai-based Patris appear to be doing when they are just eight years away from retirement. A bigger worrythey still havent started saving for it. The situation, however, is not as grave as it seems because the Patris are a double-income couple and have accumulated a fair amount of wealth. All they need to do is prioritise their goals and avoid superfluous investments.
Aswani Kumar Patri, a 52-year-old finance manager, is married to Padma, a 50-year-old insurance adviser with a public sector enterprise. The couple has two sonsBharini (22) and Satya Karthik (20). Aswanis mother also lives with them, which means the couple has three financial dependants. Aswanis monthly salary is Rs 80,000 and Padma manages to earn Rs 20,000 per month on an average. The couple also owns a house in Hyderabad, which fetches them a rent of Rs 4,000 per month. It is an old house constructed 13 years ago. The present value of the house would be around Rs 40 lakh, estimates Aswani.
The Patris monthly expenses come to Rs 30,000. They also pay an EMI of Rs 11,000 for the loan they took for their current house at Panvel, Navi Mumbai. It is a three-bedroom apartment and we plan to continue staying here, says Aswani. Apart from these expenses, there is the monthly insurance premium outgo of Rs 20,000. After all these expenses are deducted, the Patris are left with a monthly investible surplus of Rs 41,000. !
The Patris have a fairly long list of goals, comprising responsibilities more than aspirations. They want to contribute towards the higher education of their two sons and also save for their marriages. Aswani also wants to accumulate funds for setting up a business after retirement; he intends to set up a consultancy. However, the goal of building a retirement corpus, which should presently top their priority list, has been relegated to the bottom of the pile.
The problem is not restricted to the fact that the couple is yet to start planning for this goal; there are two bigger issues at stake. Firstly, they are grossly underestimating the retirement corpus they will need. Secondly, and more importantly, they are planning to take a home loan next year for a one-bedroom flat that they plan to buy in Dombivili, Navi Mumbai. The EMI for the loan will be Rs 40,000 and this liability will reduce their investible surplus to nil.
* Almost 19% of total monthly income gets exhausted in paying insurance premium.
* Concentrated stock portfolio with 92% of investment in one stock.
Should Patris take fresh liabilities on the verge of retirement?
It seems to be a poor trade-off: buying a new home as an investment in exchange for a comfortable retired life. This is what the Mumbai-based Patris appear to be doing when they are just eight years away from retirement. A bigger worrythey still havent started saving for it. The situation, however, is not as grave as it seems because the Patris are a double-income couple and have accumulated a fair amount of wealth. All they need to do is prioritise their goals and avoid superfluous investments.
Aswani Kumar Patri, a 52-year-old finance manager, is married to Padma, a 50-year-old insurance adviser with a public sector enterprise. The couple has two sonsBharini (22) and Satya Karthik (20). Aswanis mother also lives with them, which means the couple has three financial dependants. Aswanis monthly salary is Rs 80,000 and Padma manages to earn Rs 20,000 per month on an average. The couple also owns a house in Hyderabad, which fetches them a rent of Rs 4,000 per month. It is an old house constructed 13 years ago. The present value of the house would be around Rs 40 lakh, estimates Aswani.
The Patris monthly expenses come to Rs 30,000. They also pay an EMI of Rs 11,000 for the loan they took for their current house at Panvel, Navi Mumbai. It is a three-bedroom apartment and we plan to continue staying here, says Aswani. Apart from these expenses, there is the monthly insurance premium outgo of Rs 20,000. After all these expenses are deducted, the Patris are left with a monthly investible surplus of Rs 41,000. !
The Patris have a fairly long list of goals, comprising responsibilities more than aspirations. They want to contribute towards the higher education of their two sons and also save for their marriages. Aswani also wants to accumulate funds for setting up a business after retirement; he intends to set up a consultancy. However, the goal of building a retirement corpus, which should presently top their priority list, has been relegated to the bottom of the pile.
The problem is not restricted to the fact that the couple is yet to start planning for this goal; there are two bigger issues at stake. Firstly, they are grossly underestimating the retirement corpus they will need. Secondly, and more importantly, they are planning to take a home loan next year for a one-bedroom flat that they plan to buy in Dombivili, Navi Mumbai. The EMI for the loan will be Rs 40,000 and this liability will reduce their investible surplus to nil.
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