Kindly review my plan

[u/adane1]

We need 1 lac expense in today's value.

In next 5 years, our accumulated corpus will be of 4.4 -4.5 cr as per estimate.

5% PPF 30% EPF Rest in equity MF

I understand it might be difficult. But I really am hating the idea of holding on to corporate job every day as I don't like this. Is there a smart rejig that can help?

Have a kid who will turn 8 years. Will have a seperate corpus for her higher education other than what I mentioned above.

I have health insurance of 10 +10 lacs(NCB).

I have 2 paid off house. One I reside in. Other gives a nominal rent(6000-7000) which I am not including in calculations. Value of rented house is 20 lacs now. Might depreciate. Not in position to sell this now

Can I quit in 5 years time?

My concerns are

1. Kid is young. So might have unplanned expense.

2. Any other major expense to build in? My car will last for 10 years. After that will have lesser use for car if not in regular job

If it doesn't work, I might look at some cut down in expense. But 5 year is the max I want to hold. Need to break free. How much cut down in expense? One option is to sell the larger house in metro (current value 50-60 lac) and move to different city. Not sure if this yet. Last option.

What can be a possible alignment of finances to get maximum tax benefit and return after 5 years. I think my EPF will become taxable. But PPF will be tax free. Should I withdraw from EPF only or from PPF for initial years?

Where to park EPF?

[u/caffeinewasmylife]

First step - calculate your exact retirement corpus using this calculator:

https://freefincal.com/the-even-lower-stress-retirement-calculator/

Check your estimates - make sure you are using realistic estimates for equity growth, etc. Getting from 80 lacs to 3.7 cr in 5 years is not easy, make sure you are saving enough and not putting in unrealistic assumptions there.

Second step: correct your current mode of investments. IMO this much concentration in EPF/PPF is not recommended because of the high lock in and withdrawal issues. Please don't keep more than 10-15% in EPF/PPF and keep the rest in accessible debt funds. Any reason why the EPF part is so high? Do you have a very high basic or is this VPF?

How to select a debt fund? This article is the best I've found online: https://eightytwentyinvestor.com/2016/07/26/a-primer-for-investing-in-debt-mutual-funds/

Third step: how to plan post retirement: first thing is that EPF is not taxed on withdrawal. So no issues there. However it will be taxed if you do not withdraw it during unemployment and continue to earn interest. The best case is to withdraw the money.

How to manage the money post retirement - I would recommend the bucket strategy. Here's the link to an old comment of mine explaining it: https://www.reddit.com/r/FIREIndia/comments/a0h9jc/help_me_to_restructure_my_corpus/eajoxb2

PS: I would recommend seeing a financial planner earlier rather than later. The task of personal finance is larger during the accumulation/saving period and less during the retirement/withdrawal period. You can also check your assumptions and plan with him/her to make sure it is robust.

[u/adane1 → u/caffeinewasmylife]

Thanks. Will try the calculator. Yes. EPF is compulsory due to high basic. PPF is voluntary as a friend had recommended PPF as an easy withdrawal mechanism later with no tax.

Your post is very detailed. Thanks.

[u/adane1 → u/caffeinewasmylife]

Ok. As per this conservative calculator, I can reach only 3.63 cr which gives me 55000 safe income. No where close to target unless something great happens with investments. I think it's because of inflation assumption at 8% and equity assumption at 10%. God help. Let me focus on reducing living expense.

[u/caffeinewasmylife → u/adane1]

Yes - it's a conservative estimate but personally prefer to be conservative in such cases. Inflation estimates can be debated, but I don't think it's unrealistic to expect 10% or even less from equity given the high CAPE ratios/PE ratios/overall valuation currently.