PLAN OF ACTION

Term assurance of ` 1 crore may be taken by Mr Umesh for about 30 years to safeguard the family against the loss of income until retirement. It will cost about ` 17,500 per year. The disposable surplus of ` 11.2 lakh must be invested in the following proportion for the next 25 years.

Invest ` 50,000 a month in a systematic investment plan of balanced ( equity and debt) over the next 25 years. This will help in creating a corpus of ` 1.5 crore at cost (` 4.72 crore in value terms if growth is aimed at eight per cent a year). This will help him to plan for his children’s marriage and retirement needs in full.

Invest ` 1.5 lakh a year in a PPF yielding 7.6 per cent a year. Over 20 years, this will translate into a future value of 70.6 lakhs. This money can be placed in a debt fund from the age of 55- 70 years and systematically withdrawn for later on. In between the term, if required, funds can be partially withdrawn for children’s higher education.

The EPF accumulation presently of ` 10 lakh with funding at same pace, earning 8 per cent a year and gratuity at retirement will fetch him about ` 1.25 crore at retirement. The PPF at maturity can be used to buy an immediate pension policy at retirement.

Bank deposits may be kept at bare minimum levels to meet contingency requirement for the next 15 years.

Create a Will in favour of each of the spouse and ensure that all financial holdings have a nomination.