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Confused about EPF Pension? Should I Choose Retirement or Superannuation at 58?

Anil

Anil Rego  |388 Answers  |Ask -

Financial Planner - Answered on Jul 26, 2024

Anil Rego is the founder of Right Horizons, a financial and wealth management firm. He has 20 years of experience in the field of personal finance.
He’s an expert in income tax and wealth management.
He has completed his CFA/MBA from the ICFAI Business School.... more
Suresh Question by Suresh on Jul 26, 2024Hindi
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Sir, I have completed 58 years and what reason should I select for exit date in EPF Retirement or Superannuation for pension? kindly advise soon.

Ans: Hi,
This would depend on how soon you want to start receiving the pension. Assuming that you need the pension starting from age 60, you can apply for refund of EPF amount after age 55 since EPFO considers 55 as the retirement age. For superannuation, it is better to wait till the age of 60 because this comes with tax exemptions.
Best Regards,
Anil Rego,
Founder & CEO,
Right Horizons
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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Dear sir, I am going to be 55 in next march. I am a Pvt. Sector Employee, I have 45 lacs as pf as on date and would get 9 lacs as gratuity. 15 lacs in SIPs. Want to quit due to work stress. I am the only earning member. How to plan my monthly income and am I eligible for epf pension. Working since last 27 yrs. Have 4 lacs in NPS.
Ans: As you are planning to quit your job here is what can be considered before doing the same:-

Estimate your monthly expenses: Create a detailed budget factoring in all your essential and non-essential expenses. This will give you a clear picture of your monthly needs.

Prioritize debt repayment: Ensure you clear any high-interest debts to avoid financial stress.

Lifestyle adjustments: Consider if adjustments like downsizing your living arrangements or reducing discretionary spending can help bridge any income gaps.

Plan for unforeseen events: Build an contingency fund to cover unexpected expenses.

You are eligible for an EPF pension if you complete a minimum service period of 10 years and are at least 58 years old. However, since you mentioned turning 55 in March, you'll need to wait for 3 years to access the pension.

To plan your monthly income we can consider your current assets PF corpus (45 lacs), gratuity (9 lacs), SIPs (15 lacs), and NPS (4 lacs). We suggest you to invest the current available amount in mutual funds and opt for monthly SWPs or you can invest some amount in Post office schemes and take the advantage of Post office monthly scheme. Please remember SWPs are tax efficient whereas any amount received from POMIS will be taxable at your applicable slab rate.

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Hello Sir, I am 36 years with a salary of 1.4 per month, have PF balance of 16 lakhs, and Employe stocks of 20lakhs worth. Your advice for my retirement planning if I need to chose by 45 year's
Ans: It's wonderful that you're taking steps to plan for your retirement. At 36, you're in a prime position to make some smart decisions for your future. Your current salary and existing investments show that you're already on a good track, so let's build on that foundation.

Firstly, kudos on having a substantial PF balance and employee stocks. That's a solid start towards securing your retirement. Now, let's strategize further. Retirement at 45 means you have about nine years to optimize your investments.

Given your timeframe and risk appetite, we should focus on growth-oriented investments. While real estate might seem appealing, let's explore other avenues due to the associated risks and illiquidity.

Instead, consider diversifying your portfolio with a mix of equity and debt instruments. Since you're not keen on index funds, we can explore actively managed mutual funds. These funds are managed by professionals who aim to outperform the market, potentially yielding higher returns.

Now, regarding your Employee Stocks, while they can be a valuable asset, it's essential to review their performance regularly. Don't hesitate to consider diversifying them to minimize risk.

Additionally, ensure you have adequate health and life insurance coverage. Unexpected medical expenses or unfortunate events can derail even the best-laid plans.

Lastly, stay committed to your financial goals. Regularly review your investments and adjust them as needed. Remember, retirement planning is a marathon, not a sprint.

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Mutual Funds, Financial Planning Expert - Answered on Oct 04, 2024

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Hi sir, i am Arun Banerjee 36y, wanna retire by 45.current corpus around 32 lacs in mf. pf ppf fd leave encash nps n gratuity comes around 41 lacs as of now. Monthly invest 21000, 13000 in sip's n rest in lic's. Can I call it off at 45.
Ans: Arun, retiring at 45 is an ambitious goal, but it is achievable with careful planning. Let’s break down your situation and assess whether you can retire with financial security at 45, based on your current savings, investments, and future needs.

You have already built a strong base, but some adjustments and strategies will be needed to ensure your retirement is sustainable. Here’s a detailed evaluation of your financial position.

Current Financial Situation

You have Rs 32 lakhs invested in mutual funds. This is an excellent start and shows you're already focusing on long-term wealth creation.

The Rs 41 lakhs you’ve accumulated in PF, PPF, FD, NPS, leave encashment, and gratuity further strengthens your retirement base.

In total, your current corpus stands at Rs 73 lakhs.

You are investing Rs 21,000 monthly, with Rs 13,000 in SIPs and Rs 8,000 in LIC policies. This is a good habit, but the LIC policies might not offer you the same growth as mutual funds.

Goal of Retiring at 45

Retiring at 45 means you will have to support yourself without active income for possibly the next 30–40 years. This requires a substantial corpus to cover living expenses, healthcare costs, inflation, and other unexpected needs.

The key challenge will be to build a big enough retirement corpus that generates sufficient passive income. At the same time, the principal amount should not get depleted quickly.

Let’s look at how you can improve your plan for early retirement.

Maximizing Mutual Fund Investments

Your mutual fund portfolio is already a solid part of your wealth. The Rs 32 lakh corpus, combined with Rs 13,000 monthly SIPs, will grow over time. But to retire at 45, your investment rate needs to be a bit more aggressive.

Consider increasing your SIP contributions gradually. Even a small increase each year can make a big difference by the time you reach 45.

Continue focusing on equity mutual funds, as they offer higher growth potential. With 9 years left for retirement, equity investments will help compound your wealth.

Actively managed funds will likely give you better returns than passive funds like index funds. Fund managers make strategic decisions based on market conditions, which gives you an edge over passive strategies.

Reevaluating LIC Policies

You currently invest the remaining Rs 8,000 per month in LIC policies. While these policies offer insurance benefits, the returns are typically lower compared to mutual funds.

If your LIC policies are investment-based (such as ULIPs), it may be a good idea to surrender them and reinvest that amount in mutual funds. This will help you achieve higher returns.

Instead of investment-based LIC policies, you should focus on term insurance for life coverage. This way, your insurance needs are met, and you still have enough left to invest in high-growth instruments like mutual funds.

Balancing Risk and Safety

A retirement plan should include both growth and safety. While equity mutual funds help you grow wealth, it's important to balance this with safe investments.

Your PF and PPF already provide safety. These instruments will continue to grow without any market risk and offer you a cushion of stability.

NPS is another good retirement planning tool, as it offers both market exposure and safety in the form of government bonds. It also provides tax benefits.

As you approach 45, you should consider shifting some of your investments to debt funds, which are less volatile than equity funds. This helps in capital preservation while still providing returns.

Inflation-Proofing Your Retirement

Inflation is the silent killer of purchasing power. At an average inflation rate of 6-7%, your monthly expenses will increase significantly over time.

Your retirement corpus needs to generate returns that beat inflation. This is why you cannot rely entirely on fixed-income instruments like FDs or PPF, as they often don’t keep pace with inflation.

Equity funds, over the long term, provide inflation-beating returns. Hence, maintaining exposure to equity investments is critical.

Tax Planning for Mutual Funds

Understanding the tax implications of mutual funds is crucial.

For equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) on equity funds are taxed at 20%.

For debt mutual funds, LTCG and STCG are taxed according to your income tax slab.

Having a tax-efficient withdrawal strategy post-retirement will ensure that you maximize your net returns. A certified financial planner can help you structure this.

Healthcare Planning

One of the biggest expenses in retirement is healthcare. Medical costs tend to rise as we age, and with early retirement, you won’t have employer-provided health insurance anymore.

Consider getting a comprehensive health insurance policy that covers you and your family.

Building an emergency corpus that is earmarked for health-related expenses is also a smart move.

Additional Income Streams

Since retiring at 45 leaves you with a long retirement horizon, it may help to create additional income streams.

You can explore part-time work or consultancy options post-retirement. This gives you flexibility and adds to your income without putting too much strain on your retirement corpus.

Investing in dividend-yielding mutual funds can also give you a steady income without touching your principal.

Revisiting Your Plan Regularly

Retirement planning is not a one-time exercise. Your financial needs and goals can change over time. It's crucial to revisit your retirement plan at least once a year to make sure you’re on track.

A certified financial planner can help you rebalance your portfolio, adjust your SIPs, and ensure your retirement corpus grows in line with your goals.

Final Insights

Arun, retiring at 45 is an achievable goal, but it requires careful planning and disciplined investing. You already have a strong foundation with Rs 73 lakhs across mutual funds and other instruments.

To further enhance your retirement plan, consider increasing your SIP contributions, reducing LIC investments, and maintaining exposure to high-growth equity funds.

Balancing your portfolio with safe investments, planning for healthcare costs, and tax-efficient strategies are equally important.

A certified financial planner can guide you through this journey and ensure that your early retirement is smooth and financially secure.

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K. Ramalingam, MBA, CFP,

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www.holisticinvestment.in

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Dear Sirs Please review my investment towards 7.5 CR. There are 2 components towards it , 1) Generate monthly income post tax of 4 lakhs, 2) Investment Corpus Towards Capital appreciation Towards option 1 : Investing in the following - a) Tata Motors or Chola Perpetual Bonds 1.4 cr , b) ICICI Balanced Advantage Fund 1cr, c) Kotak Balanced advantage fund 1 cr Towards option 2 ie Capital Appreciation investing in the following - a) HDFC Flexi Cap Equity fund 1.25 cr , b) Parag Parikh Flexi Cap Equity Fund 1.25 cr, c) ICICI Prudential India Opportunities Fund 80 Lakhs, d) ICICI Prudential Multi asset fund 80 lakhs I am looking at a 5 - 7 year investment timeline. Have taken early retirement at 50 years and need the funds to sustain myself. Please also advise if Perpetual bonds is a good option Thanks
Ans: Your investment strategy is thoughtfully constructed. You’ve clearly defined two components:

Monthly income of Rs. 4 lakhs

Capital appreciation with a horizon of 5 to 7 years

Let’s assess each component carefully and suggest improvements.

 

 

Monthly Income Generation Plan – Review and Insights
 

You’ve allocated the following towards income generation:

Perpetual Bonds – Rs. 1.4 crore

Two Balanced Advantage Funds – Rs. 2 crore

 

Let us look at the key strengths and areas to optimise.

 

Perpetual Bonds – Risk and Suitability

These bonds are issued with no maturity date.

Issuers can delay interest payments if they face pressure.

Tata Motors or Chola bonds offer high interest, but risk is also higher.

You need dependable income. Perpetuals may cause delays or cuts.

If rated ‘AA’ or lower, risk becomes even higher.

For safety, consider shifting part to high-rated corporate bonds.

Choose instruments with a defined maturity or high credit rating.

 

 

Balanced Advantage Funds – Regular Payout Source

You have allocated Rs. 2 crore to two funds here.

These are suitable for monthly SWP (Systematic Withdrawal Plan).

They reduce risk by shifting between equity and debt.

This provides smoother return and helps handle market volatility.

Ideal for your need of steady income.

Choose funds with a good track record of 5+ years.

Go for regular plans through a Certified Financial Planner.

They provide guidance and documentation support.

 

 

Key Adjustments to Consider for Income Plan

Don’t depend only on one instrument for income.

Keep part in ultra-short debt funds to manage emergency needs.

You may also allocate a small amount to floating rate funds.

Avoid riskier perpetuals if your lifestyle depends on this cash flow.

 

 

Capital Appreciation Portfolio – Review and Suggestions
 

You have allocated Rs. 4.1 crore across four funds:

Two Flexi Cap Funds – Rs. 2.5 crore

One Thematic Fund (Opportunities) – Rs. 80 lakhs

One Multi Asset Fund – Rs. 80 lakhs

 

This section looks well-structured. Still, here are some observations.

 

Flexi Cap Funds – Long Term Growth Drivers

These offer a mix of large, mid and small cap stocks.

Flexible allocation helps in market ups and downs.

You have spread Rs. 2.5 crore across two flexi caps.

It gives diversified equity exposure.

Good for your 5–7 year horizon.

Continue this investment.

 

 

Thematic Opportunities Fund – Aggressive but Focused

Thematic funds bet on specific trends.

They can perform well in short cycles.

But they are more volatile.

Rs. 80 lakhs is a high amount in one theme.

Reduce this to Rs. 50 lakhs.

Redirect balance to diversified equity or large-cap funds.

 

 

Multi Asset Fund – Helps Manage Volatility

These funds invest across equity, debt, and gold.

They balance returns with risk.

Ideal for medium-term wealth building.

You can continue this allocation.

Add a second multi-asset fund for balance.

 

 

Direct Plan Exposure – Re-evaluate for Personalised Support

Direct plans avoid distribution cost.

But guidance is missing.

Without CFP support, wrong fund choice or exit may happen.

Regular plans through a Certified Financial Planner give tracking.

They help during market swings, taxation and rebalancing.

This becomes very important in large-value portfolios.

 

 

Asset Allocation Review – What’s Working and What Needs Tune-Up
 

Your allocation is roughly:

45% towards income (Rs. 3.4 crore)

55% towards growth (Rs. 4.1 crore)

This mix looks aligned to your goal of current income and future corpus.

Still, consider the following:

 

Review this mix yearly with your Certified Financial Planner

If market rallies too much, shift some growth to income

If interest rates rise, reduce equity withdrawal and increase debt

Keep Rs. 25–30 lakhs in liquid fund for any large emergency

 

 

Taxation on Mutual Funds – Stay Aware of Recent Rules
 

Equity mutual funds:

LTCG above Rs. 1.25 lakh is taxed at 12.5%

STCG is taxed at 20%

 

Debt mutual funds:

Both LTCG and STCG taxed as per your tax slab

Most retirees fall in lower slab but tax planning still needed

Prefer SWP for income, not dividend option

Keep P&L statement ready for advance tax filing

 

 

Tax-Free Cash Flow – Can You Improve It?
 

You can also look at these steps:

Use HUF or family member’s name for part investment

Income from their investment gets taxed in their slab

Helps reduce your tax burden

Invest Rs. 1.5 lakh yearly in PPF for guaranteed, tax-free return

Can also explore Senior Citizen Savings Scheme (SCSS) if eligible

 

 

Avoid Index Funds – Not Suitable for Your Stage
 

Index funds copy the stock market

They don’t adjust based on conditions

There’s no downside protection in falling markets

Actively managed funds give more opportunity to earn and protect

Your current selection rightly avoids index funds

 

 

Avoid Direct Plans Without Support
 

Direct plans don’t include expert guidance

No one checks asset allocation or strategy alignment

You’re investing a large corpus. Mistakes cost more here

Use regular plans via an experienced Certified Financial Planner

They help in paperwork, KYC, taxation, SWP planning, rebalancing

Their personalised help adds more value than small cost savings

 

 

Perpetual Bonds – Should You Continue or Exit?
 

Not the best for regular income seekers

Issuer can skip interest if company faces pressure

Price of these bonds also swings with interest rates

You can’t rely fully on them for Rs. 4 lakh per month

Exit partly and shift to short-duration or banking PSU debt funds

These are better for predictable income with lower risk

 

 

Review of Liquidity and Emergency Planning
 

At least Rs. 30–35 lakhs should be in liquid or overnight funds

This money is for health, family needs or urgent situations

Don’t touch your income or capital funds for this purpose

This buffer will give you confidence and reduce portfolio risk

 

 

Risk Management – How to Prepare for Unseen Events
 

Review health insurance for self and spouse

If you’ve not already done it, get Rs. 25 lakh cover each

Consider critical illness policy to protect against long illness

Update nominations in all funds and accounts

Keep estate plan or Will ready. Talk to your planner on this

 

 

Rebalancing Strategy – Keep it Dynamic
 

Review portfolio every 6 months

Don’t chase top-performing funds blindly

Instead, rebalance as per your income need and age

Reduce equity by 5% every 2 years as you age

This protects corpus and supports steady cash flow

 

 

Finally
 

You’ve structured your Rs. 7.5 crore goal very thoughtfully

You are clear about income and long-term appreciation

Your fund choice is broadly good, with only minor changes needed

Avoid risky bonds like perpetuals as your lifestyle depends on monthly cash flow

Go for actively managed regular funds via Certified Financial Planner support

Keep tax, liquidity, insurance and emergency planning all in place

This will help you enjoy your retirement peacefully and confidently

 

 

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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