Confused about Max Life policy: Continue or Stop paying premium?

Ans: At the age of 64, it is important to carefully assess the effectiveness of your financial strategies. You have been investing Rs. 2,00,000 annually into the SBI Life Retired Smart Policy since 2019. Now that your last premium has been paid in September 2024, the key question is whether you should continue with this policy or shift to other investment options like mutual funds. Let’s evaluate this from various perspectives to guide you in making an informed decision.

Understanding Your Policy Structure
This policy is a ULIP (Unit-Linked Insurance Plan), which offers life cover as well as investment benefits. However, ULIPs often have a high-cost structure, including premium allocation charges, fund management fees, and mortality charges, especially in the early years of the policy. This affects the overall returns.

Now that you have completed five years of premium payments, you might have overcome the high initial costs. Let’s break down the key factors:

Premium Paid: You have paid Rs. 2,00,000 annually for 5 years, which amounts to Rs. 10,00,000 in total.

Policy Period: It is a 10-year policy, and you are halfway through. You still have 5 years remaining.

Returns: ULIP returns are linked to the performance of the funds you are invested in, which could be either equity, debt, or balanced. These returns vary, and ULIPs typically do not outperform mutual funds due to higher costs.

Let’s now weigh the pros and cons of continuing with your policy.

Benefits of Continuing the SBI Life Retired Smart Policy
There are a few advantages to staying with the current policy, especially since you have already paid 5 years of premiums.

Life Insurance Coverage: The policy provides life cover, which can be a key benefit if you do not have adequate life insurance coverage. However, at the age of 64, the need for life insurance generally reduces unless you have dependents.

Completion of Lock-in Period: You have completed the lock-in period, so you can exit without penalties if needed. You also avoid the heavy initial charges that were already deducted in the early years.

Tax Benefits: The premiums paid provide tax benefits under Section 80C, and the maturity proceeds could be tax-free under Section 10(10D), subject to conditions. However, these tax benefits alone may not justify continuing the policy if the returns are subpar.

Disadvantages of Continuing the SBI Life Retired Smart Policy
On the flip side, there are several reasons why continuing with the policy might not be the best decision for you.

High Charges: ULIPs come with several charges, such as fund management fees, mortality charges, and policy administration fees. These charges reduce the overall return on your investment. Mutual funds, in comparison, tend to have lower fees, especially if you invest through a certified financial planner.

Limited Flexibility: In a ULIP, you are limited to the funds offered by the insurance company. These funds may not have the same performance or diversity as mutual funds managed by top fund houses. Actively managed mutual funds have a proven track record of generating superior returns over the long term due to the expertise of professional fund managers.

Mediocre Returns: Most ULIPs deliver lower returns than mutual funds, primarily due to their cost structure. You might have experienced average growth in your policy, which could affect your retirement planning.

Lack of Liquidity: ULIPs typically do not offer liquidity until the end of the policy term, whereas mutual funds provide better flexibility, allowing you to redeem funds when needed.

Exploring Mutual Fund Investments
Switching to mutual funds could be a better strategy at this stage, given that you’ve completed 5 years in the ULIP. Here are the advantages of transitioning to mutual funds:

Higher Returns Potential: Actively managed mutual funds have consistently outperformed ULIPs due to their lower cost structure and professional fund management. You can invest in funds that suit your risk profile, whether equity, hybrid, or debt funds.

Better Flexibility: Mutual funds offer the flexibility to switch between different types of funds based on your financial goals. This flexibility is lacking in ULIPs, which have a rigid structure.

Low Costs: Mutual funds, especially through a certified financial planner, have much lower expense ratios than ULIPs. This ensures that a larger portion of your investment goes toward earning returns rather than paying fees.

Tax Efficiency: With the new tax rules for mutual funds, long-term capital gains (LTCG) on equity mutual funds above Rs. 1.25 lakh are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%. Debt mutual funds are taxed according to your income tax slab. Despite these tax implications, mutual funds may still offer better post-tax returns compared to ULIPs.

Disadvantages of Index Funds and Direct Funds
While you might be tempted to explore index funds or direct mutual fund investments, they have certain limitations.

Index Funds: These funds replicate market indices like Nifty or Sensex. However, they do not offer the potential to outperform the market. Actively managed funds, on the other hand, have the ability to generate higher returns by capitalising on market opportunities. Given that your policy period has another 5 years, you may benefit more from actively managed funds than passive index funds.

Direct Funds: While direct funds have lower expense ratios than regular funds, they may not be ideal for everyone. Without professional advice, it can be challenging to choose the right funds and manage your portfolio effectively. Investing through a certified financial planner ensures that you receive expert advice, helping you achieve better long-term results.

Should You Surrender the Policy?
Given the analysis above, surrendering the SBI Life Retired Smart Policy and reinvesting in mutual funds could offer you better returns, lower costs, and more flexibility. However, it is important to consider the following before making a decision:

Surrender Charges: Check if there are any surrender charges applicable to your policy. If these charges are high, you may want to wait until the policy matures to avoid any penalties.

Tax Implications: While the premiums paid are eligible for tax deductions, the maturity proceeds might also be tax-exempt. However, surrendering the policy could lead to tax implications, so it’s important to consult with a certified financial planner to understand the tax impact.

Alternative Investment: If you decide to exit the policy, mutual funds offer a diverse range of options tailored to your financial goals and risk tolerance.

Final Insights
In summary, your decision to continue or exit the SBI Life Retired Smart Policy depends on your financial goals, risk tolerance, and investment strategy.

The policy has provided life insurance coverage and tax benefits, but its returns may be limited due to high charges.

By switching to mutual funds, you can potentially achieve higher returns, lower costs, and better flexibility for your remaining investment horizon.

Avoid index funds and direct funds in favour of actively managed mutual funds through a certified financial planner to get the best results for your retirement planning.

Best Regards,

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

Ans: At 45, your commitment towards early retirement, children’s future, and disciplined saving is deeply appreciated.

Let’s evaluate your goals, current resources, and what changes you may need. This answer will help you take corrective steps and prepare a practical, structured plan.

Understanding Your Financial Vision
You wish to:

Retire at 55 with Rs 3 crores retirement corpus

Allocate Rs 1 crore for children's education and marriage

You are already:

Saving Rs 60K monthly in mutual funds (SIPs)

Contributing Rs 15K monthly into PF

Have Rs 64 lakhs accumulated already (MF + PF + Stocks)

Living in a self-owned house (no rent expenses in retirement)

These are solid and encouraging building blocks. However, the key question is — are these numbers enough?

Retirement Corpus Requirement Evaluation
Let’s begin with retirement.

You are targeting Rs 3 crores at 55

This needs to support at least 25-30 years of retired life

Your monthly income today is Rs 1.6 lakhs

Retirement expenses (without kids' education or EMIs) may be around Rs 70K to Rs 90K/month

Inflation will make these numbers higher by the time you retire

So, Rs 3 crores is a reasonable and safe retirement goal.

But let’s now assess if you are on track.

Reviewing Existing Investments and Monthly Contributions
You already have:

Rs 40 lakhs in mutual funds

Rs 15 lakhs in PF

Rs 9 lakhs in stocks

You are also:

Contributing Rs 60K/month into mutual funds

Contributing Rs 15K/month into PF

That’s Rs 75K/month of disciplined investing. Very strong effort.

Still, we must assess future growth of each instrument, taking inflation and realistic return assumptions.

Suitability of Investment Mix
Mutual Funds – Rs 40L corpus, Rs 60K SIP monthly

You’re doing well with equity mutual fund SIPs

Make sure these are active mutual funds and not index funds

Index funds lack downside protection and underperform in sideways markets

Actively managed funds provide flexibility in dynamic Indian markets

Focus on diversified equity mutual funds

You must have a mix of large cap, flexi cap, mid cap, and select sector/thematic

Avoid sectoral overexposure, stay away from new NFOs without track record

Stocks – Rs 9L

Direct stocks are high-risk and need continuous monitoring

Don’t treat this as core retirement corpus

Use stock portfolio for opportunity-based returns only

No need to increase stock exposure at this stage

PF – Rs 15L corpus, Rs 15K contribution/month

Good for stability and conservative fixed income

PF will provide a safe retirement cushion

But do not rely on PF alone for retirement corpus creation

Rate of return is fixed and may not beat long-term inflation fully

Children’s Education and Marriage Fund: Rs 1 Crore Target
Your son is 15 and daughter is 11.

So you will need:

Partial fund in next 2-3 years (son’s education)

Major amount by next 10-12 years (daughter’s education and marriage)

This means you need to create a parallel corpus of Rs 1 crore without disturbing your retirement savings.

Plan of Action:

Allocate a separate mutual fund folio for this goal

Do not mix it with your retirement investments

Choose balanced advantage, flexi-cap, and large-mid funds for this purpose

Withdraw from equity gradually once goal is near (start moving to short-term debt funds 3 years before need)

You may already be on track here if you dedicate part of the Rs 60K SIPs

But if all your SIPs are targeted for retirement only, you must either:

Increase your SIPs by Rs 15K–20K/month

OR

Allocate part of your stock portfolio and annual bonuses for kids’ goal

Evaluating SIP Sufficiency Towards Retirement
Rs 60K/month SIP in equity mutual funds for 10 years will build solid corpus only if:

Funds are actively managed by competent AMC

SIPs increase 10% every year (step-up SIPs)

You don’t stop SIPs even during market crashes

You rebalance regularly through a Certified Financial Planner

If you stay consistent, you are likely to reach Rs 3 crore, but without much surplus.

So, there is limited cushion in your current plan. You’re on track, but only marginally.

Required Adjustments for Better Safety
Increase Monthly Investment Gradually

From Rs 75K/month, try to increase SIPs by 10-15% yearly

Use salary hikes, annual bonus, or incentives to fund extra SIPs

Keep PF as it is; no need to increase PF contribution beyond current limit

Separate Goals and Tracking

Create two sets of SIPs: one for retirement, one for kids’ education

Avoid mixing funds or redeeming prematurely from retirement corpus

Avoid Index and Direct Funds

Direct funds lack advisory, tax planning, rebalancing, and behaviour control

You may miss correction opportunities or exit too late during volatility

Better to invest via regular plans with a trusted MFD or CFP

They offer active support, periodic alerts, tax strategy, and customised advice

Many investors earn less not because of bad funds, but due to bad timing and behaviour

Certified Financial Planner brings discipline and strategy in market fluctuations

Insurance and Risk Protection
You didn’t mention any insurance.

At 45 with family responsibilities, review:

Term insurance: Ensure Rs 1 crore+ coverage till age 60

Health insurance: Have Rs 10–20 lakh family floater + top-up

Critical illness cover: Optional but useful after 50

Without insurance, even the best investment plan can collapse under sudden medical or death risk.

Emergency Fund
You didn’t mention cash reserves.

Keep:

At least 6 months' expenses in liquid or ultra-short duration debt fund

Don’t keep this in equity or PF

You may use part of your PF loan provision only if very urgent

Investment Behaviour and Tax Awareness
Stay invested during downturns

Market cycles are natural

Many investors lose by stopping SIPs in bear markets

Those who stay invested enjoy strong recovery

Tax planning

Equity mutual funds LTCG: Only above Rs 1.25 lakh taxed at 12.5%

STCG in equity: Taxed at 20%

Debt funds: Taxed as per slab

Plan redemption accordingly with a Certified Financial Planner

Avoid real estate as an investment

Your house is an asset to live in, not a liquid financial tool

Real estate requires high maintenance, has low liquidity, and tax issues

Better to keep your future investments in mutual funds instead

Retirement Withdrawal Strategy
When you retire at 55:

Don’t withdraw entire mutual fund corpus

Keep equity portion invested and withdraw via SWP

Use bucket strategy:

First 3 years expenses in ultra short and liquid funds

Next 5 years in balanced or hybrid

Long-term part in equity

This protects you from selling during market crash

A Certified Financial Planner can set this up and track annually

Keep Reviewing Progress Every Year
Your current SIP discipline is very strong. But review:

Fund performance every 12 months

Goal progress every year

Increase SIPs gradually

Exit underperforming funds only under expert guidance

Avoid chasing star ratings or social media hype.

Key Action Points
Separate children’s corpus from retirement corpus

Increase SIPs by Rs 15K/month if possible

Avoid index and direct funds; shift to regular plans via MFD with CFP support

Keep investing during all market cycles

Maintain term and health insurance coverage

Create an emergency reserve now itself

Use a Certified Financial Planner for tracking and behaviour control

Do not withdraw from mutual funds prematurely

Review and rebalance annually

Finally
You are very close to being on track.

But only with continued discipline, increased SIPs, and expert guidance can you safely reach all goals.

You are doing far better than most. But don’t take comfort and stay static.

Make small changes now. They will give huge benefits later.

Retirement at 55 is fully possible — but only with strong control on investment behaviour and cash flow discipline. With a Certified Financial Planner by your side, you can fine-tune this further.

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

Confused about Max Life policy: Continue or Stop paying premium?

I have Max life policy High Growth Fund - Premium Driven - ULIF01311/02/08LIFEHIGHGR104 with 5.22 lack premium for 5 years. Now it is one year over .Shall I continue this policy or stop paying premium.