Use equity to sustain long retirement life

Atul Doshi, 51, gave up his chartered accountant role a few years ago to serve society. Born and educated in Gujarat, Doshi built a career in Mumbai. Currently, he resides in Mumbai with wife Heena, 48, and his parents. The couple has two daughters — Disha, 24, who is a commerce graduate, and Sonali, 22, a chartered accountant.
What are they saving for?
The couple’s immediate goal is to create as corpus of Rs 30 lakh for their daughters’ marriages.Next, they want to ensure that they continue to maintain their existing lifestyle. Apart from these goals, they wish to go on a foreign trip.
The above costs will be revised based on inflation.
Where are they today?
Cash flow: The couple’s total annual inflow from all sources is Rs 11.50 lakh, against an annual outflow of Rs 11.42 lakh. The entire inflow is only in the form of interest and dividend earned from various kinds of investments. A small portion of the earning is also received from trading in direct equities. The outflow consists of routine household expenses, insurance premium and taxes.
Net worth: The total assets are worth Rs 3.27 crore, which includes cash and near-cash assets of approximately Rs 1.50 lakh, and personal assets in the form of house, car and jewellery worth Rs 2.11 crore. Assets from an investment perspective are worth Rs 1.15 crore. There is no outstanding liability. Therefore, the family’s net worth is also Rs 3.27 crore.
Contingency fund: Given the mandatory monthly expenses of Rs 61,000, the couple’s balance in savings bank account of Rs 1.50 lakh is approximately 2.5 months’ reserve.
Health & life insurance: Doshi does not have any life insurance policy. He has health insurance of Rs 3 lakh for each member of the family.
Savings & investments: In addition to the Rs 1.50 lakh in savings bank account, the couple’s invested assets include shares worth Rs 50 lakh, bonds worth Rs 40 lakh and PPF worth Rs 25 lakh.
Fiscal analysis
The couple is living within means and on income generated from their investments. Going ahead, there could be some reduction in assets at the time of the daughters’ marriages. Therefore, it is prudent to save some amount of money on a regular basis. The family’s health insurance needs enhancement. There is no need for life insurance for Doshi as there is no active income, meaning any eventuality to Doshi is not a financial loss to the family. Also, having predominantly liquid assets is a wise move. Most importantly, he has not spread his assets too thin across many investments. All the assets are well documented and properly preserved. Upon his death, his family will be able to get control of his assets with ease. This aspect is often missed out by most families.
The way ahead
Contingency fund: The couple must maintain a contingency reserve of Rs 1.90 lakh, out of which Rs 30,000 should be held as cash in hand and the balance in an FD linked to a savings bank account.
Health & life cover: Doshi can increase the health cover for the entire family to Rs 5 lakh each. Alternatively, he can continue with the existing cover and opt for a family floater plan of Rs 25 lakh.
Planning for financial goals
Daughters’ marriages: The family can utilize their gold to make jewellery and fund other marriage expenses by liquidating a few direct equity stocks.
Retirement planning: The couple’s current lifestyle is being sustained by returns generated from investments. Over the years, with increase in inflation, there could be some shortfall. If possible, the couple should try and build up their corpus by an additional Rs 25-30 lakh in the next 10-12 years.
Foreign travel: The couple should plan for this goal only after both the daughters are married and settled in life.