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Can I Stop Contributing to EPF After Turning 58? - A Reader's Question

Ramalingam

Ramalingam Kalirajan  |7952 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 02, 2024

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 - Sep 01, 2024Hindi
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Can I discontinue my EPF after attaining the age 58 years?

Ans: At age 58, continuing EPF can provide tax-free, stable returns and employer contributions if you’re still working. However, the interest rate may reduce, and some employers may require withdrawal. Assess your financial needs, other savings, and tax implications before deciding. If liquidity is needed, consider partial or full withdrawal. For diversification, look into actively managed mutual funds or PPF. Discontinuing EPF could affect your pension, so evaluate this carefully. Consult with a Certified Financial Planner to ensure your decision aligns with your retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
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

Ramalingam Kalirajan  |7952 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

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Hi Sir, I have stopped EPF contributions wef Sept 23 due to end of my regular job at age of 57. Do I need to withdraw exactly as soon as I complete 58? Or I can park the money in EPFO to earn interest and withdraw when I require later? Do I need to
Ans: You're making prudent considerations regarding your EPF contributions. Let's discuss your options:
Withdrawal Timing:
• You have the flexibility to withdraw your EPF balance after the age of 58, as per EPFO regulations. There's no mandatory requirement to withdraw immediately upon turning 58. You can choose to keep the funds parked in your EPF account to continue earning interest until you require them.
Interest Earnings:
• By leaving your EPF balance untouched, you can benefit from accruing interest on your savings. EPF offers competitive interest rates, providing an opportunity for your funds to grow over time. This approach can be particularly advantageous if you don't have an immediate need for the funds and wish to capitalize on their earning potential.
Withdrawal Considerations:
• While you have the option to retain your EPF balance and withdraw it at a later date, it's essential to evaluate your financial goals and liquidity needs. Consider factors such as your retirement plans, anticipated expenses, and other sources of income. If you foresee a need for funds in the near future, withdrawing from your EPF account may be a viable option.
Financial Planning:
• As you navigate this decision, consider consulting with a Certified Financial Planner (CFP) who can provide personalized guidance based on your specific financial situation and goals. A CFP can help you assess the pros and cons of retaining your EPF balance versus withdrawing it, taking into account factors such as taxation, inflation, and investment alternatives.
In summary, you have the flexibility to decide when to withdraw your EPF balance after the age of 58. While retaining the funds in your EPF account allows you to continue earning interest, it's essential to weigh this option against your financial needs and objectives. By carefully evaluating your circumstances and seeking professional advice, you can make an informed decision that aligns with your long-term financial well-being.

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Ramalingam

Ramalingam Kalirajan  |7952 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 28, 2024

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I retired from service at the age of 60 in June 2024, and I want to start working again now in Nov 2024. How to continue with EPF after this 4 month gap in my contribution to EPF.
Ans: Returning to work after retirement is a thoughtful decision. You can definitely continue your Employees' Provident Fund (EPF) contributions. Here’s how to proceed after your four-month gap in contributions.

1. Understanding EPF Contributions
The EPF scheme is a savings scheme for employees in India. Both employees and employers contribute to this fund.

Employee Contribution: A part of your salary goes into EPF.

Employer Contribution: Your employer also contributes to your EPF account.

These contributions build your retirement savings.

2. Continuation After Retirement
After retiring, if you start working again, your EPF account can remain active. Here's how to continue:

Rejoin a Recognized Establishment: Ensure that the new employer is registered under the EPF scheme. This is essential to restart contributions.

New EPF Account or Old One: You have the option to either use your old EPF account or open a new one. Using your old account is usually more beneficial.

Inform Your New Employer: Share your EPF account details with your new employer. This allows them to deduct EPF contributions from your salary.

3. Managing the Gap in Contributions
The four-month gap in your contributions will not negatively impact your EPF account. Here’s why:

Account Status: Your EPF account will remain active even without contributions during the gap.

Interest Accrual: Your EPF account continues to earn interest during the gap. This helps grow your savings.

4. Contributions Resumption Process
Once you rejoin the workforce, follow these steps to resume contributions:

Complete KYC Formalities: Ensure that your Know Your Customer (KYC) details are updated with the EPF office. This includes your bank details and personal information.

Salary Structure with EPF: Discuss the salary structure with your new employer. Confirm the percentage of your salary to be contributed to EPF.

Monthly Contributions: Begin regular monthly contributions to your EPF account once you start receiving your salary.

5. Benefits of Continuing EPF Contributions
Continuing your EPF contributions offers several advantages:

Tax Benefits: Contributions to EPF are tax-deductible under Section 80C of the Income Tax Act.

Compounding Growth: The interest earned on your EPF contributions is compounded annually, enhancing your savings.

Retirement Security: Continued contributions increase your retirement corpus, ensuring a secure future.

6. Retirement and EPF Account Management
Managing your EPF account wisely is crucial. Here are some tips:

Monitor EPF Balance: Regularly check your EPF balance. This helps you track your savings.

Use the EPF Portal: Utilize the EPF online portal for updates on your account. This makes managing your account easier.

Know the Withdrawal Rules: Familiarize yourself with the withdrawal rules. Understand when and how you can access your funds.

7. Financial Planning for Your Future
Incorporating EPF contributions into your overall financial plan is essential. Consider the following:

Assess Monthly Needs: Calculate your monthly expenses to determine how much you need to save.

Diversify Investments: Beyond EPF, consider diversifying your investments for better returns. Explore mutual funds, fixed deposits, or other instruments.

Emergency Fund: Maintain an emergency fund to cover unforeseen expenses. This ensures your EPF savings remain intact for retirement.

8. Exploring Other Retirement Options
If you're considering other retirement savings options:

National Pension Scheme (NPS): This provides an additional avenue for retirement savings. NPS is tax-efficient and offers market-linked returns.

Mutual Funds: Actively managed funds can provide higher returns compared to traditional savings. They can help you reach your financial goals faster.

Stocks: Investing in equities can offer growth potential. However, consider your risk tolerance before investing.

9. The Importance of Regular Monitoring
Continuously monitoring your EPF account and investments is key:

Review Contributions: Regularly check if your contributions align with your financial goals.

Adjust as Necessary: Be prepared to adjust your contributions based on changes in your financial situation.

Consult a Certified Financial Planner: If you have questions, consider seeking advice from a Certified Financial Planner. They can help tailor a financial strategy that fits your needs.

10. Tax Implications of EPF
Understanding the tax implications of your EPF account is essential:

Tax-Free Withdrawals: Withdrawals from your EPF account after retirement are tax-free if you meet the conditions.

Interest Earned: The interest earned on your EPF contributions is also tax-free.

Monitor Tax Changes: Stay updated on any changes in tax regulations related to EPF.

11. Preparing for Future Financial Goals
As you transition back into the workforce, keep an eye on your long-term financial goals:

Retirement Goals: Assess if your current savings will meet your retirement needs.

Child’s Education: Plan for your child’s future education expenses, if applicable.

Healthcare Planning: Ensure you have adequate health insurance to cover potential medical expenses.

12. Engaging with EPF Community
Joining the EPF community can provide insights and support:

Online Forums: Participate in online forums or social media groups related to EPF. This can provide helpful tips and shared experiences.

Attend Workshops: Look for workshops on retirement planning and EPF management. These can deepen your understanding and empower you.

13. Seeking Professional Guidance
If you need help navigating your financial journey, professional guidance can be beneficial:

Certified Financial Planner: Consult a Certified Financial Planner for a personalized plan that meets your needs.

Regular Reviews: Schedule regular reviews with your planner to adjust your strategy as needed.

14. Preparing for the Next Chapter
As you re-enter the workforce, embrace this new chapter. Keep a positive mindset and stay committed to your financial goals.

Stay Informed: Keep yourself updated about EPF rules and regulations. This ensures you make informed decisions.

Celebrate Milestones: Celebrate each milestone in your financial journey. This keeps you motivated and focused on your goals.

15. Final Insights
You can continue your EPF contributions after a brief gap. By rejoining a registered establishment and informing your employer, you can seamlessly resume your contributions. This will help grow your retirement savings while providing tax benefits. Stay proactive in managing your finances and explore other investment opportunities to secure your future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner

www.holisticinvestment.in

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

..Read more

Latest Questions
Janak

Janak Patel  |17 Answers  |Ask -

MF, PF Expert - Answered on Feb 13, 2025

Money
In early 2018, I had faced some financial problems (monthly Rs. 10,000 deficit) as I was working with a public sector enterprise. At that time, I was searching for a loan and got an agency that can provide Rs. 10,000 as Payday loan (monthly basis maximum 35 days) and rate of interest was 1% per day. These loan products were from NBFCs. I took this loan and this was the starting point. Due to my financial problems, I started taking these type loans from various agencies and rate of interest 0.7%-1% per day. In 2022, I had almost 15 payday loans amounting Rs. 10 lakhs. After that, I have been applying for a loan from almost all banks and NBFCs to close these paydays, but nobody is able to provide a loan due all payday loans have been shown in CIBIL as well as few bounces of my personal loan I had already with Kotak Bank. Now the situation is like that I have more than 25 payday loans amounting to more than Rs. 15 lakhs. Last 2 years I have been applying for a personal loan to close these but no banks and NBFCs are not providing. Every month I am giving and taking payday loans and the interest amount is too high. I have a Tata AIA pension policy as well as PF, both cannot be surrendered at this moment. Now, the major issue is how to overcome this financial mess I did. I don't have any options left at this moment. So I would request you if anybody can provide me assistance through your sources / channels to solve my financial problem. I can return the amount on a monthly installment basis and give my Tata AIA pension policy as well as PF documents for security. I have been working in an engineering consultancy firm and monthly income is almost Rs. 2 lakhs
Ans: HI Jitu,

In summary, you have 15 lakhs loans at 1% per day interest (= 365% per annum). No options to borrow from any other organized sources like Bank/NBFC. So monthly Interest is 4.5 lakhs.
Monthly Income is 2 lakhs.

This is called a Debt Trap, where your income is less than your outflow (debt), so you are in a negative balance always and keep borrowing to fill the gap. No point in going into the history of the situation but I hope this has been a big life lesson for you.

Borrowing against you Pension policy can be considered but depends on the company and note that this will be at a high interest rate.
Borrowing from PF funds is only under certain situations (e.g. illness, education, marriage) and so even that is ruled out.
I assume you have already considered all/any asset you may own to repay.

The solution cannot be a very simple one. But I can recommend a couple of options which you can see if they help. You plan should simple -
1. Find a source of funds to repay your current loans
2. Stay with bare minimum requirement for next few years and repay maximum amount towards new loan
3. Do not take any new loans and stay on track for next few years, no matter what.

With a salary of 2 Lakhs, you should take a hard look at your living expenses and cut out all except the basic necessities. At least on paper come up with a number that you can discuss with prospective lenders mentioned below. Give them confidence of your ability to pay back every month with a realistic number e.g. over 1 lakh per month. Make this as high as you can make it. Make compromises everywhere possible and evaluate each expense to see what you can eliminate for the next couple of years, except food and absolutely basic needs, compromise on everything else. And ensure you make this work no matter what. You will have to be strong willed to achieve this and make it work.

Check with any close friends/family members/relatives who will trust you and provide you with some loan and provide you with time to repay. Offer to pay them interest which is higher than FD but reasonable for you and you can go as high as 20% per annum. At 20% you can pay back 55~60K per month for 3 years and payback the loan with interest.

Assuming you have a bank account for direct salary deposit, approach the bank and explain your situation truthfully to them and request an overdraft/loan and offer them to recover an agreed amount at an agreed interest rate from your account directly as soon as your salary is deposited. Again the interest rate will be high but if this works, you will be on your way to recovery. Even if they offer an interest rate of 30%~40% per annum and recover in 3 years, your EMI will be around 62K~70K per month.

Approach your employer and discuss if a loan can be provided to you at a reasonable rate of interest and recovered from your salary each month. If you have been employed with them for over a year or longer, and if they consider to extend a loan this may be the best solution you can get. You can offer to sign a contract for this (stay with employer for a period or until loan is paid up).

Is there any other source of funds you can approach with a similar proposal then do so, as long as you can get a chance to payoff your current set of loans and have a manageable EMI amount to pay back over the next few years, just take the best option and keep every desire aside and stay focused on getting back on track.

Please note that borrowing from an alternate source is not going to work if you take a loan and relax after that. You have already impacted your CIBIL score which makes lenders stay away. Now your top priority will be to find a source of funds at reasonably high interest rate between 20% to 40% resulting in an EMI of 55K to 70K for 3 years, and ensure you do not default the payments and clear this ASAP. If you can pay higher amount each month, then do that and get out of these loans as quickly as possible.

With honesty and sincerity if you continue to stay on track, you can eventually start coming back to normal life where you can plan your expenses and save and invest too. But do remember to live within your means and save as much as possible. Over time build back your CIBIL score for future requirements.

Hope this is helpful in some way.

Thanks & Regards
Janak Patel
Certified Financial Planner.

...Read more

Harsh

Harsh Bharwani  |74 Answers  |Ask -

Entrepreneurship Expert - Answered on Feb 13, 2025

Asked by Anonymous - Nov 10, 2024Hindi
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Career
Hello sir, what are the prospects of digital marketing. Is freelance work available in digital marketing. Who can be its buyers.
Ans: Hello,
Digital marketing has a promising future as businesses increasingly rely on online platforms to promote their products and services. With the rise of social media, e-commerce, and artificial intelligence, companies are shifting towards digital strategies to engage customers and drive sales. The industry is constantly evolving, creating a strong demand for skilled digital marketers in areas such as SEO, social media marketing, content creation, paid advertising, and email marketing.

Freelancing Opportunities in Digital Marketing:-

Freelancing in digital marketing is a highly viable career option. Many businesses, especially startups and small companies, prefer hiring freelancers to manage their online presence rather than investing in full-time employees. As a freelancer, you can offer specialized services like:
1. Social media management
2. Search engine optimization (SEO)
3. Pay-per-click (PPC) advertising
4. Content writing and copywriting
5. Email marketing and automation
6. Website development and optimization

Freelancers can find work through platforms like Upwork, Fiverr, Freelancer, and LinkedIn or by directly reaching out to businesses.

Potential Buyers of Digital Marketing Services

The demand for digital marketing services comes from various sectors, including:
1. Small and Medium Enterprises (SMEs): Local businesses aiming for a broader customer base.
2. E-commerce Brands: Online stores looking to enhance visibility and conversions.
3. Startups & Entrepreneurs: New businesses seeking cost-effective digital strategies.
4. Large Corporations: Companies investing in long-term digital branding.
5. Coaches & Influencers: Personal brands needing social media growth.
6. Marketing Agencies: Agencies that outsource specialized tasks to freelancers.

With digital marketing becoming a necessity in today’s business landscape, professionals in this field - whether working as employees or freelancers - can expect steady growth and lucrative opportunities. I hope this will help you.

...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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