I was recently quoted in Economic Times WEALTH (5-11 August 2024) in the Q&A section where a panel of experts answers readers’ questions related to various aspects of their personal finances.
The exact question and the answer –
Here is the text version of the query and the reply –
Q – Q. I am 70 years old and my wife is 60. I have Rs 18 lakh in stocks and mutual funds (40:60), Rs 20 lakh in fixed deposits, Rs 10 lakh in the Senior Citizens’ Savings Scheme, and Rs 11 lakh in a bank savings account. My only goal is to save Rs 30 lakh for my younger son’s wedding. Is this saving pattern good? Also, please suggest good options to earn higher returns than those from my current investments.
Additional data provided by the reader later –
1. Rent + annuity+ interest from FD & shares approximately Rs 40,000/month
2. Two years, my second son is 33 years
3. My first son through the company where he is working arranged an insurance package for me and my wife for Rs 8,00,000/ each.
4. Cash flow as per point 1 and expenses negligible as all our day-to-day living expenses are taken care of by my two sons
A – You have confirmed that regular day-to-day expenses are borne by children and hence, there is no dependency on the portfolio for regular income. But still, as per additional data provided by you, a monthly cashflow of Rs 40,000 is available each month via rent + annuity + FD interest
You have clearly mentioned that your ‘only goal’ is to save for your younger 33-year-old son’s wedding (for which you need Rs 30 lakh) in 2 years’ time. So, the marriage goal is in the short term and hence, should be handled accordingly via asset allocation.
Your assets include – Rs 10 lakh in SCSS which is practically illiquid. Also, with an 8.2% interest rate currently, it’s best to keep it and extend it if possible. The Rs 18 lakh in stocks and mutual funds are part of the equity bucket and hence, shouldn’t be allocated to any short-term goal.
What remains is Rs 20+lakh in bank FDs and Rs 11 lakh in savings accounts. So mathematically, this should take care of your son’s marriage goal (if in the short term). Also, the amount in a savings account can be moved to FD or Arbitrage Fund for the next 2 years.
One thing to note is that your existing asset base is Rs 59 lakh. And with one goal set to take about Rs 30 lakh, your asset base will be reduced to almost half soon. It is good that your current expenses are managed via family and hence things are smooth. More so as you get about Rs 40,000 monthly from rent + annuity + FD interest. But once the Rs 20 lakh FD is used up for marriage, it will reduce the monthly interest income by Rs 12,000 that you get currently assuming 7% or more from your FDs.
So to gradually replenish your savings after your son’s marriage, you should look at saving the remaining leftover cashflows (via rent & annuity) as much as practically feasible.
You have asked about good options to earn higher returns than those from current investments. Your current asset allocation is 31% in equities and 51% in debt (SCSS, FD) and 18% in cash/savings account. Given your current age band and since we don’t have details of your cashflows, this 31% equity seems to be more than sufficient based on available information. Any unnecessary risk-taking should be avoided for the time being. Also, an investment advisor can better advice you if you provide him with more information/details which are missing in your question here.
It is noted that you have health cover (of Rs 8 lakh each) from your elder son’s employer. This is sufficient from the base case scenario but it might be a good idea to check super-top-up plans if you want to further enhance the cover.
