I am a 31-year-old school teacher, unmarried and earn ₹53,890 per month. I deposit ₹36,500 per annum in general provident fund (GPF) and public provident fund (PPF). I have started investing ₹10,000 per month in UTI nifty index fund direct plan growth option. I aim to retire in 2050. Am I on the right track?
Besides, I am paying a home loan EMI of ₹15,089 per month and a personal loan EMI of ₹15,064 per month. I have a Jeevan labh LIC policy with a quarterly premium of ₹11,822. I have an SBI LIFE-Smart wealth builder policy with an annual premium of ₹40,000 and an SBI LIFE-smart shield policy with an annual premium of ₹3,899.
Meanwhile, Aegon has rejected my ₹1 crore online term policy on the grounds that my income is not eligible to get a ₹1 crore cover. How do I solve this problem? Also, I am going to get married this year. What investment strategy should i adopt to meet my marriage expenses, future childbirth expenses, and education of children?
— Laltu Panja
Your annual savings in general provident fund (GPF), public provident fund (PPF), and monthly investment in the mutual fund is ₹1.56 lakh. This, if saved for 29 years till your retirement in 2050, will help you accumulate ₹45 lakh. And at an average earnings rate of 9% (a large part of this portfolio is in fixed income), the portfolio value will become ₹2.2 crore. You are on the right track, but you need to increase your savings on a regular basis as your income increases.
At the same time, you should plan to repay the personal loan earlier as it comes at a very high borrowing cost.
Term insurance is typically a factor of annual income and is targeted at 10 times your annual income. This could be the reason why it is being denied as you are applying for something more than 15 times your annual income. At the same time, you should go for term insurance when you have dependents. What is more important for you is having health insurance in case you are not already covered.
Further, to provide for your short-term expenses, you may consider saving in bank recurring deposits, ultra-short-term debt funds to take care of the said expenses.
Surya Bhatia is managing partner of Asset Managers.