Diversify the portfolio while making plans to financially secure life after retirement.
Ripudaman Singh, 41, a professional working in the e-commerce industry, plans to retire at the age of 60. Till about four years back, he was relying solely on his employees’ provident fund (EPF) for retirement savings. Singh got a rude shock when his financial planner told him that he won’t be able to afford his current lifestyle during the sunset years with only the EPF money.
There are many people like Ripudaman who rely only on their provident fund for retirement expenses. EPF is a tax-efficient, long-term investment product but contributions to it are limited — 12 per cent of the basic salary and matching employer contribution. Part of the employer’s contribution (which is 8.3 per cent, generally subject to a maximum of 1,250) goes towards employees’ pension scheme. Frequent withdrawal is also common, which brings down the corpus.
EPF is predominantly a debt instrument. It was allowed to invest in equity only recently, and the exposure is limited to 15 per cent. It is difficult for a debt-heavy instrument to generate inflation-beating returns.
Asset Allocation
Once you realise that EPF alone will not be enough to meet your retirement needs, you need to start additional investments, whose returns will depend on the asset allocation (see: Final Figure). So, before exploring the instruments, decide on how much you need to invest in equity, debt or any other asset. “Asset allocation can be decided after considering expenses and goals after retirement, risk profile, liquidity, income needs, time to goal, taxation, etc,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisories. If you are not able to ascertain your asset allocation, take the help of an adviser.
Here are a few options you can use for retirement planning.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Pension Scheme - Safety Net
The move to introduce the UPS has evoked mixed reactions. Analysts believe its funding will have limited impact on the fiscal math
The Reit Choice?
Real Estate Investment Trusts (Reits) Are Gaining Traction As Interest Rates Stabilise. But Returns Could Be Affected By Adverse Economic Conditions And Market Volatility
CORPORATE - Calling to Account
The sudden exit of Byju's auditor BDO marks the latest in a long series of setbacks for the edtech firm
EMPLOYMENT: Skills Push
The skill development ministry plans to partner with the UGC to improve the employability of undergraduates
Building on a Vision
L&T'S CHAIRMAN EMERITUS A. M. NAIK HAS BUILT A MAMMOTH ENTERPRISE THAT IS BUILDING A NEW INDIA, FROM ITS METRO RAIL SYSTEMS TO THE RAM TEMPLE
"KYS more important than KYC"
Vijay Kedia is a renowned equity investor; the value of his listed portfolio stands at around ₹1,750 crore
ROXX STAR
THE THAR ROXX COMBINES LUXURY WITH PERFORMANCE TO MAKE A STRONG STATEMENT IN THE MID-SIZE SUV SEGMENT
HIT THE GROUND RUNNING
Smartwatches have become indispensable tools for runners, offering real-time insights into pace, distance, heart rate, and more. Here are a few you can consider
TURNING THE TABLES
INDIA'S FURNITURE MARKET IS POISED FOR A GLOBAL TAKE-OFF. ALREADY, A HOST OF GLOBAL BRANDS HAVE MADE THE COUNTRY THEIR HOME, BUT INDIAN COMPANIES ARE NOT TOO FAR BEHIND
THE EVOLUTION OF ATHERA
IDENTIFYING OPPORTUNITIES IN ADVANCE HAS STOOD THIS BENGALURU-BASED VC FUND IN GOOD STEAD. NOW, WITH A HEIGHTENED FOCUS ON TECHNOLOGY, IT WANTS TO SUSTAIN THE SUCCESS