What will be my monthly pension after retirement?

Ans: Maximizing Pension Benefits: A Comprehensive Guide
Navigating pension benefits can be complex, but with strategic planning, you can optimize your retirement income. Let's delve into your situation and explore the potential pension amount you can expect.

Evaluating Pension Eligibility
Assessing Service Duration

Determine your total service duration with your previous employer from 1993 to 2015, spanning over 22 years.
Confirm the pension eligibility criteria based on your service duration with the company.
Understanding Pension Certificate

Review the pension certificate indicating a monthly pension of Rs. 6,500, provided upon your resignation in 2015.
Understand the terms and conditions outlined in the certificate regarding eligibility and payment structure.
Considering Post-Retirement Employment
International Employment

Take into account your employment abroad for four years, from 2015 to 2019, which may impact your pension entitlements.
Assess whether your international employment affects your eligibility or pension calculation.
Subsequent Indian Employment

Factor in your employment with an Indian company from 2019 to 2020, followed by a tenure with an MNC until last month.
Consider how your post-retirement employment affects your pension entitlements and calculations.
Determining Pension Amount
Combining Pension Entitlements

Combine the pension entitlement from your previous employment with the pension from your subsequent Indian employment.
Evaluate if the combined pension amount aligns with the terms specified in your pension certificate.
Calculating Pension

Calculate the total pension amount considering both periods of employment and their respective pension entitlements.
Verify if the calculated pension aligns with the pension certificate's stipulations and your service duration.
Seeking Clarifications and Guidance
Seeking Clarifications

Reach out to the pension authorities or your previous employer to clarify any doubts regarding your pension entitlements.
Request detailed explanations regarding the calculation methodology and factors influencing your pension amount.
Consulting a Certified Financial Planner (CFP)

Seek guidance from a Certified Financial Planner (CFP) specializing in retirement planning and pension benefits.
Receive expert advice on maximizing your pension entitlements and optimizing your retirement income.
Planning Ahead
Retirement Income Strategy

Develop a comprehensive retirement income strategy considering your pension entitlements, savings, and potential sources of income.
Ensure your retirement plan aligns with your financial goals, lifestyle preferences, and long-term objectives.
Regular Monitoring

Regularly monitor your pension account statements and retirement income sources to track your financial progress.
Stay informed about any updates or changes in pension regulations that may affect your retirement benefits.
Conclusion
By assessing your service duration, understanding your pension entitlements, and considering your post-retirement employment, you can determine the pension amount you can expect. Seeking clarifications, consulting with a CFP, and planning your retirement income strategy will empower you to make informed decisions and secure your financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: First, let me commend you for planning ahead for your retirement. Given your work history in India and abroad, understanding your pension can be complex. Let's break it down to make it simple and clear.

Eligibility for Pension
You mentioned working in a private company in India from 1991 to 2007. The Employees' Pension Scheme (EPS) of 1995, managed by the Employees' Provident Fund Organisation (EPFO), would cover this period. To be eligible for a pension under EPS, an employee must complete at least 10 years of service and attain the age of 50 for early pension or 58 for regular pension.

Service Period Calculation
You have worked in India for 16 years (1991 to 2007). This makes you eligible for the EPS pension since you meet the minimum requirement of 10 years.

Pension Calculation Method
The EPS pension is calculated based on the pensionable salary and the number of years of service. The pensionable salary is the average of the last 60 months of basic salary and dearness allowance (DA).

Understanding Pensionable Salary
From your information:

Basic Salary: Rs. 8,510
Dearness Allowance (DA): Rs. 6,051
So, your pensionable salary would be the sum of your basic salary and DA.

Early Pension at Age 55
Since you are currently 53 and considering early pension at 55, there is a reduction factor applied. The pension amount is reduced by a percentage for each year before 58.

Additional Considerations
Inflation and Future Value
It is important to consider the impact of inflation on your pension amount. While the pension might seem sufficient now, its value will decrease over time due to inflation. You might want to explore other investment options to supplement your pension income.

Savings and Investments
Since you have worked abroad, you might have accumulated savings and investments there. It's essential to factor in these amounts when planning your retirement. Diversifying your investments can help ensure a stable and sufficient income during retirement.

Health Insurance
Make sure you have adequate health insurance coverage. Healthcare costs can be significant in retirement, and having insurance can protect you from unexpected medical expenses.

Planning for Retirement
Given your current age of 53, you have a few more years to plan and save for your retirement. Here are some steps you can take:

Assess Your Financial Situation
Evaluate your current savings and investments.
Calculate your future income needs, considering inflation.
Diversify Your Investments
Invest in a mix of low-risk and high-risk options.
Consider mutual funds for long-term growth.
Review Your Insurance
Ensure you have adequate health insurance.
Consider a term life insurance policy if you don't have one.
Create a Retirement Budget
Estimate your monthly expenses in retirement.
Include costs for healthcare, travel, and leisure activities.
Final Insights
Your pension from EPS will provide a basic level of income. However, considering inflation and future financial needs, it's crucial to have a diversified investment portfolio. Planning now will help ensure a comfortable and secure retirement.

Thank you for your detailed query. Your foresight in planning for retirement is admirable. By following these steps and regularly reviewing your financial plan, you can achieve a financially secure retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Estimating Your Pension Amount from EPS
Understanding Your Financial Journey
First, it's commendable that you are planning for your retirement. Knowing the specifics of your employment history helps in estimating your pension accurately. You worked in a private company in India from 1991 to 2007 and have been working abroad since then. Your last drawn basic salary was Rs. 8,510 and Dearness Allowance (D.A.) was Rs. 6,051.

Basics of Employee Pension Scheme (EPS)
Eligibility:

Service Period: Minimum of 10 years of service is required to be eligible for the pension.
Age: Pension starts at the age of 58, but you can opt for early pension at 55 with a reduced amount.

Pensionable Salary:

It is the average salary of the last 60 months before exiting the EPS scheme.
For simplicity, let’s assume your last drawn basic + D.A. as the pensionable salary, which is Rs. 14,561 (8510 + 6051).
Pensionable Service:

Your service period is from 1991 to 2007, which is 16 years.
Early Pension Reduction
If you opt for early pension at 55, there is a reduction of 4% per year before 58. So, if you start at 55, it’s a reduction of 12% in total.

Calculating Your Pension
Without Reduction (at age 58):
Monthly Pension =(14561×16 / 70)=Rs. 3,327

With Early Pension Reduction (at age 55):
12% reduction for starting 3 years early:

Reduced Pension=3327×0.88=Rs. 2,928

Factors to Consider
Inflation: The calculated amount may seem small due to inflation over the years.

Additional Savings: Consider building a supplementary retirement corpus through other investment avenues.

Current Employment: Check if your current employment abroad provides any pension benefits or savings plans.

Recommendations for Financial Security
Mutual Funds:

Equity Mutual Funds: Invest in equity mutual funds for long-term growth to supplement your pension.
Debt Funds: These provide stability and reduce overall portfolio risk.
Systematic Investment Plan (SIP):

Discipline: Start a SIP to ensure disciplined investing.
Diversification: Allocate investments across different mutual fund categories for risk mitigation.
Reassess LIC Policy:

Surrender: Consider surrendering any traditional LIC policies and reinvesting in higher-return mutual funds.
Term Insurance: Opt for term insurance for adequate life cover at a lower premium.
Emergency Fund:

Essential: Set aside 6-12 months’ worth of expenses in a liquid fund for emergencies.
Regular Review:

Monitor Investments: Periodically review and adjust your portfolio based on market conditions and personal circumstances.
Seek Professional Advice: Consult a Certified Financial Planner (CFP) to optimise your investment strategy.
Conclusion
With your pensionable service and the pension formula, your estimated pension amount at age 55 is approximately Rs. 2,928 per month. This amount is relatively modest, so it’s crucial to supplement it with additional savings and investments. By investing in mutual funds through SIPs, maintaining an emergency fund, and considering term insurance, you can build a secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: At 58 years old, you have a diverse portfolio, including:

Mutual Funds: Rs. 1.8 crore
Equity: Rs. 79 lakh
Provident Fund (PF): Rs. 75 lakh
National Pension System (NPS): Rs. 10 lakh
Public Provident Fund (PPF): Rs. 10 lakh
Monthly SIP: Rs. 1 lakh
This well-diversified portfolio provides a strong foundation for your retirement planning.

Estimating the Corpus at Retirement
Given your assets and continued contributions, let's estimate the corpus by January 2027.

Mutual Funds Growth
Your current mutual fund investments of Rs. 1.8 crore, with continued monthly SIP of Rs. 1 lakh for three years, can grow significantly, assuming a reasonable growth rate.
If we consider a conservative growth rate of 10-12% per annum, the corpus could expand to a substantial amount by your retirement.
Equity Growth
The Rs. 79 lakh in direct equity, depending on market conditions and stock selection, could also grow at an average rate of 10-12% per annum.
However, equity investments carry more risk, and the returns can be volatile.
Provident Fund (PF) Growth
The Rs. 75 lakh in your PF account is relatively stable, growing at a rate of around 8-8.5% per annum.
This amount will also compound until your retirement, adding to your retirement corpus.
NPS Growth
The Rs. 10 lakh in NPS will continue to grow, offering tax benefits and a mix of equity and debt exposure.
PPF Growth
The Rs. 10 lakh in PPF will grow at a rate of 7-7.5% per annum, providing a stable, tax-free return.
Total Expected Corpus at Retirement
Considering all these factors, your total corpus by January 2027 could range between Rs. 4-5 crore. This includes growth from mutual funds, equity, PF, NPS, and PPF contributions.

Planning for a Steady Monthly Income of Rs. 2 Lakh
To achieve a monthly income of Rs. 2 lakh post-retirement, you need a robust withdrawal strategy.

Systematic Withdrawal Plan (SWP)
An SWP from your mutual fund investments can provide a steady income.
If you withdraw Rs. 2 lakh per month, that would amount to Rs. 24 lakh annually.
With a well-balanced portfolio, a withdrawal rate of 5-6% is considered safe to avoid depleting your corpus.
Annuity Consideration
While not the first recommendation, you could consider converting a portion of your corpus into an annuity.
Annuities offer a guaranteed monthly income, but they usually offer lower returns and less flexibility compared to mutual funds.
Managing Your Portfolio for Retirement
Balanced Approach: As you approach retirement, consider shifting a portion of your equity investments to more stable debt instruments to reduce risk.
Diversification: Keep your portfolio diversified across various asset classes to manage risk and ensure steady returns.
Regular Review: Continuously review your portfolio's performance and make adjustments as needed, considering changes in market conditions and personal circumstances.
Final Insights
By maintaining a disciplined approach and sticking to your financial plan, you can achieve your retirement goals. A diversified portfolio, coupled with a well-planned withdrawal strategy, can provide the steady income you seek.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello,
Given that your current corpus in PF is not mentioned, the future value of the PF after 6 years will be 3,35,000 at 8.25%.