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43 Years Old Earning 1 Lpa Seeking Retirement Planning Advice

Milind

Milind Vadjikar  | Answer  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Feb 09, 2025

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Timber Question by Timber on Feb 08, 2025Hindi
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I am 43 years old and working with a MNC earning 1 Lpm. I am planning for retirement fund. Please suggest me which instrument is best. And also help me compare between NPS and Pension plan of insurance company, which is better and why?

Ans: Hello;

NPS is much better than pension plans offered by insurance companies due to the following reasons;

1. Lower costs
2. Flexibility to change fund manager for different asset classes
3. Better Returns
4. Tax benefits
5. Annuity flexibility
6. Limited withdrawals allowed
7. Tier 2 investment account feature
8. NPS Vatsalya for minors

Best wishes;
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

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Mutual Funds, Financial Planning Expert - Answered on Apr 27, 2024

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Hi Kirtan, I am 45 now. I am looking for a pension plan. I can invest upto Rs 5000 per month. Should I go in NPS or LIC? What are pro and cons for both?
Ans: Considering your age and investment amount, NPS (National Pension System) could be a preferable option over LIC for a pension plan. Here's a breakdown of the pros and cons of each:

NPS (National Pension System):
Pros:

Flexibility: NPS offers flexibility in choosing investment options, including equity, corporate bonds, and government securities, allowing you to tailor your portfolio based on your risk tolerance and investment goals.
Tax Benefits: Contributions to NPS are eligible for tax deductions under Section 80C, with an additional deduction of up to Rs. 50,000 under Section 80CCD(1B). Additionally, partial and lump-sum withdrawals are tax-exempt up to certain limits.
Low Cost: NPS has a relatively low-cost structure compared to traditional pension plans, with competitive fund management charges.
Cons:

Lock-in Period: NPS has a lock-in period until retirement age, with limited withdrawal options before that. Early withdrawals are subject to restrictions and penalties.
Market Risk: Since NPS invests in market-linked instruments, such as equities, there's a level of market risk involved. Returns may fluctuate based on market performance.
Limited Annuity Options: The annuity options under NPS may be limited compared to traditional pension plans offered by insurance companies like LIC.
LIC (Life Insurance Corporation):
Pros:

Guaranteed Returns: LIC pension plans typically offer guaranteed returns, providing a sense of security and predictability in retirement income.
Death Benefit: Some LIC pension plans come with a death benefit, ensuring that your nominee receives a lump sum or annuity in case of your demise.
Wide Range of Annuity Options: LIC offers a wide range of annuity options, allowing you to choose a plan that best suits your retirement needs and preferences.
Cons:

Lower Flexibility: LIC pension plans may offer limited flexibility compared to NPS in terms of investment options and withdrawal flexibility.
Higher Costs: Traditional pension plans from LIC may have higher costs compared to NPS, including administration charges and agent commissions.
Limited Tax Benefits: While premiums paid towards LIC pension plans are eligible for tax deduction under Section 80C, the overall tax benefits may be limited compared to NPS.
In conclusion, NPS tends to offer more advantages over LIC for a pension plan, given its flexibility, tax benefits, and lower costs. However, considering the potential advantages of mutual funds over NPS in terms of flexibility and potentially higher returns, you may also explore mutual fund options for your retirement planning

..Read more

Ramalingam

Ramalingam Kalirajan  |9317 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 12, 2025

Asked by Anonymous - Feb 01, 2025Hindi
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I am 30 male. Working in Mumbai in BFSI sector. My in hand salary is 67k. Looking to start investement for retirement. Please suggest if NPS would be good option. If there is any fund which is similar to NPS can suggest as well. Looking to start with 10k as beginning. Also please suggest if the NPS in tier 1 can help in tax saving as well.
Ans: Your decision to start investing early for retirement is excellent. At 30, you have time to build a strong corpus.

Let’s assess if NPS is a good choice.

Understanding NPS for Retirement
NPS is a government-backed retirement scheme.
It invests in equity, corporate bonds, and government securities.
You can choose an active or auto allocation strategy.
Tier 1 NPS is locked until retirement.
60% of maturity value is tax-free. The rest must be used for an annuity.
Tax Benefits of NPS
Contributions under Section 80CCD(1) are part of Rs. 1.5 lakh limit.
Extra Rs. 50,000 deduction is available under Section 80CCD(1B).
Employer contribution is tax-free under Section 80CCD(2).
Annuity payouts after retirement are taxable.
Limitations of NPS
NPS has restrictions on withdrawals before retirement.
Equity exposure is capped at 75%, reducing long-term growth potential.
Returns depend on market conditions and fund manager performance.
40% mandatory annuity purchase reduces liquidity at retirement.
Alternative Investment Options
Mutual funds offer better flexibility and growth potential.
Actively managed equity funds outperform index-based options.
Midcap and flexi-cap funds provide long-term capital appreciation.
Hybrid funds balance risk and return for stability.
Portfolio Strategy for Retirement
A mix of equity and debt ensures a stable corpus.
Invest through SIPs to reduce market timing risks.
Increase allocation as income grows.
Keep a mix of large, mid, and small-cap funds.
Avoid over-reliance on any single investment product.
Final Insights
NPS is good for disciplined retirement savings.
Tax benefits are attractive, but liquidity is limited.
Mutual funds offer better long-term growth and flexibility.
A combination of both can work well for retirement planning.
Increase investment gradually as salary increases.


Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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