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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 08, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Aug 22, 2025Hindi

I am a 53 year old male working abroad. I am well covered in terms of medical insurance and life insurance. My plan to retire at 63 with 1.5 lakhs per month Although I have below investments, I am looking for a annuity after age 63. Pls guide me on the best annuity option- NPS Vs SWP Vs HDFC pension plus. I have below investments so far: PPF 55 lakhs,EPF 36 lakhs, MF (total cumulative) 5.5 crores ,Employee superannuity+gratuity 14.5 lakhs, NPS 17 lakhs Monthly MF SIP ongoing 2 lakhs Company FD 10 lakhs Gold 16 lakhs My question is 1)Will investing in NPS @ 1.5 lakhs a month fine in active contribution(75%equity+25%debt)? Based on my calculation with existing Rs. 17 lakhs NPS corpus and Rs. 1.5 lakhs monthly contribution, I can get annuity of Rs. 75K per month at age 63 (besides the lumpsum amount of 60%, rest 40% as annuity). Pls suggest if this approach fine? 2) Is withdrawal from SWP a good option to receive regular monthly payment? Wouldnt the LTCG tax come in to effect with this approach since LTCG would come in beyond Rs. 1.25 lakhs of gains, pls suggest on this? 3) The HDFC life smart pension plus-gives annuity at IRR of 6%. So I will have to invest @ 30 lakhs per year for next 5 years to get annual annuity of Rs. 15 lakhs from age 63 onwards. How is this option?

Ans: You have done very structured investing and created strong wealth. At 53, planning retirement at 63 with Rs.1.5 lakhs monthly target is practical. Your portfolio size is already substantial and gives you flexibility. You are also rightly evaluating different income options. Let us analyse from all angles and provide you with a 360-degree perspective.

» Present financial strength

– PPF of Rs.55 lakhs gives safe, tax-free income support.
– EPF of Rs.36 lakhs is a strong retirement base.
– Mutual funds of Rs.5.5 crores form the biggest growth driver.
– Superannuation and gratuity of Rs.14.5 lakhs add steady support.
– NPS of Rs.17 lakhs is a start, though not very large.
– SIP of Rs.2 lakhs monthly adds immense compounding over next 10 years.
– FD of Rs.10 lakhs and gold of Rs.16 lakhs diversify safety and hedge.
– You are well protected with insurance, so assets are purely for retirement.

» Why annuity products look attractive

– Annuity gives guaranteed income for life.
– But annuity rates in India are quite low.
– Once invested, money is locked, with no liquidity.
– Inflation eats into fixed annuity income.
– For 25–30 year retirement, annuity gives certainty but reduces growth.
– You may feel safe with annuity, but real value drops with time.

» NPS active contribution option

– You plan Rs.1.5 lakhs monthly into NPS till 63.
– With 75% equity and 25% debt, growth potential is high.
– NPS gives tax benefit, but at withdrawal, 40% compulsory annuity is mandatory.
– That annuity portion will earn very low IRR, around 5–6%.
– Flexibility is less, as NPS rules restrict free usage of corpus.
– Your estimate of Rs.75,000 monthly annuity is realistic.
– But compared to mutual fund SWP, long-term income will be less.
– NPS suits those with limited discipline, but you already show financial maturity.

» SWP as income stream

– SWP from mutual funds is flexible and liquid.
– You can decide the withdrawal amount and frequency.
– Portfolio continues to grow while you withdraw.
– It is inflation friendly, as corpus is still invested in growth assets.
– Taxation is important: equity MF gains beyond Rs.1.25 lakhs LTCG taxed at 12.5%.
– STCG on withdrawals below 12 months holding is taxed at 20%.
– Still, overall taxation is lower than annuity taxation (full income tax on annuity).
– SWP also allows you to stop, pause, or increase later.
– It balances growth and income, unlike annuity which is rigid.

» HDFC life smart pension plus

– This is an insurance-linked pension product.
– IRR is around 6% only.
– You plan to invest Rs.30 lakhs yearly for 5 years, total Rs.1.5 crores.
– Annual annuity of Rs.15 lakhs means only 6% return, taxable fully.
– Liquidity is zero, you cannot access your money.
– Flexibility is lost, while better returns possible in mutual funds.
– Such products benefit insurance companies more than investors.
– Locking large amounts in such low-return product is not advisable.

» Tax comparison across options

– Annuity: taxed fully as income, no exemption, no indexation.
– SWP: equity gains taxed at 12.5% LTCG after Rs.1.25 lakhs limit.
– Debt MF SWP taxed as per income slab, so less efficient.
– NPS: lumpsum 60% tax-free, but 40% annuity fully taxable.
– Clearly, SWP from equity MF is most tax efficient in long run.

» Risk and inflation factors

– Retirement may last 25–30 years.
– Fixed annuity loses value due to inflation.
– SWP with equity exposure grows with inflation, keeping income relevant.
– PPF and EPF give some cushion but interest may reduce in future.
– Portfolio mix of growth and safety ensures both income and protection.

» Suggested approach

– Avoid locking too much in annuity products.
– Continue SIPs in equity mutual funds till 63.
– Shift part of equity gains to debt near retirement for safety.
– At 63, use SWP from mutual funds as primary retirement income.
– Keep PPF and EPF for safe drawdown later years.
– Keep NPS contributions moderate. Rs.1.5 lakhs monthly is too heavy.
– Instead, strengthen mutual funds for flexibility and growth.
– Maintain emergency corpus outside these investments.
– Review yearly with a Certified Financial Planner to adjust asset allocation.

» Final Insights

You are already on a very strong path. With your existing corpus and SIPs, you can comfortably generate Rs.1.5 lakhs per month from age 63. NPS heavy contribution will reduce flexibility and force you into annuity. SWP gives better growth, tax efficiency, and liquidity. Insurance-linked pension products like HDFC Pension Plus offer low returns and low flexibility, hence not suitable. Your focus should be on expanding mutual fund base, balancing with debt funds, and creating a flexible SWP withdrawal strategy. This approach secures income, manages tax, and keeps your retirement lifestyle safe against inflation.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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

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