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Confused about choosing the best single annuity plan in India? Here's your guide.

Ramalingam

Ramalingam Kalirajan  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 23, 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
Bela Question by Bela on Sep 23, 2024Hindi
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Which is the best single annuity plan in India

Ans: A single annuity plan is designed to provide regular income after retirement by making a one-time lump sum payment. While annuities are often marketed for guaranteed returns and retirement security, they come with certain drawbacks in terms of flexibility, inflation protection, and overall returns.

Instead of recommending a specific annuity plan, it’s important to consider a better alternative: the Systematic Withdrawal Plan (SWP). This approach often provides more flexibility, higher potential returns, and better tax efficiency than traditional annuities.

Drawbacks of Single Annuity Plans
Before jumping into alternatives, it's crucial to understand the limitations of single annuity plans:

Lack of Flexibility: Once you lock in the annuity, it’s difficult to access your funds or make changes to the plan.

Lower Returns: Annuity plans generally offer fixed returns that are not inflation-adjusted, meaning your purchasing power reduces over time.

Taxation: The entire annuity payout is taxable as income, reducing your overall returns after taxes.

Systematic Withdrawal Plan (SWP) – A Better Alternative
A Systematic Withdrawal Plan (SWP) allows you to systematically withdraw a fixed amount from a mutual fund investment at regular intervals, which can work like an annuity but with several benefits.

Advantages of SWP over Annuities
Flexibility: You can adjust your withdrawals, reinvest, or redeem your funds anytime.

Better Returns: Since you remain invested in mutual funds, you can benefit from both capital appreciation and dividends over time. Equity and debt mutual funds generally outperform annuities in the long term.

Tax Efficiency: In an SWP, you only pay capital gains tax on the gains made from the withdrawn amount, not on the entire withdrawal. The longer you hold the investment, the better the tax efficiency becomes due to long-term capital gains tax benefits.

Inflation Protection: Mutual funds, especially equity-based ones, have the potential to provide inflation-adjusted returns, ensuring your purchasing power isn’t eroded over time.

How SWP Works
Lump Sum Investment: You invest a large sum in a mutual fund (either equity or debt, based on your risk tolerance).

Regular Withdrawals: You set a fixed withdrawal amount (monthly or quarterly) just like you would receive in an annuity plan.

Growth Continues: The rest of the invested corpus continues to grow, providing potential for higher returns compared to an annuity.

Why Choose SWP?
Customisable: You can choose how much to withdraw, when to withdraw, and adjust the withdrawals depending on your needs.

Diversified Investment: SWPs can be linked to a diversified mutual fund portfolio, providing more growth potential than fixed annuity plans.

No Lock-In: Unlike annuity plans, SWPs don’t lock in your money for life. You retain control of your investments.

Final Insights
Rather than opting for a single annuity plan, consider investing in a Systematic Withdrawal Plan (SWP), which provides regular income with more flexibility, better tax efficiency, and potentially higher returns. You retain control of your investments and can adapt to changing financial needs, unlike the rigidity of an annuity.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/
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  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 07, 2024

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Resp. Sir, Thank you so much for the reply. actually I invested in ICICI Pru Guaranteed Income For Tomorrow Plan for fix income without any worry. I will get 1st Payout in sep.2038 at the age of 70 and last at the age of 94. I am 56 now and in pvt job. I am single and have no liability. I have invested in Mutual funds also ( diversified across the market cap). But I have no Insurance of anytype. coz sometime market do not give return for 2-3 years ( sometime negative return also). Hence, I thought a source of fix income should also be there irrespective of market condition. additonally who knows the rate of annuity by 2038 whether it will be 6 % or 5% or 4%. Investing in ICICI ( GIFT) is giving me @ 6+% upto the age of 95. If I calculate SIP at moderate return of 10-12% ( pessimistic) that will give me a corpus between 1.2.to 1.3 Cr. I will get @ 6+% annually fix income out of this ( from ICICI) without any worry. and 66 Lakh return . Market returns are not gurenteed. Hence, that was the thought process behind purchasing ICICI ( GIFT). Now I am feeling greedy. that's why I posted this query on public platform.
Ans: Your thinking behind the ICICI GIFT plan shows a good focus on guaranteed income, especially since it offers stability irrespective of market fluctuations. However, with a rate around 6%, the return is modest, especially considering inflation over the years. While it does provide a secure, fixed income, this rate may limit long-term purchasing power.

Since you already have a diversified mutual fund portfolio, a balanced strategy might involve shifting some of your commitment from fixed-return plans to higher-yield instruments over time. This way, you gain more flexibility and potential for growth while still preserving part of your income security.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,

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

..Read more

Ramalingam

Ramalingam Kalirajan  |7922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 09, 2025

Money
Sir,which mutal fund scheme is best
Ans: Choosing the right mutual fund depends on your goals, risk appetite, and investment horizon. Instead of pointing out one-size-fits-all schemes, it is better to analyze the broader aspects that can guide you toward the right decision.

Let’s explore how you can approach this effectively.

Define Your Investment Goals
Your financial goals set the foundation for choosing a mutual fund.
Decide if your goal is for wealth creation, retirement, or child’s education.
Match the type of mutual fund with your specific goal.
Understand Your Risk Tolerance
Analyze your ability to handle market volatility.
If you can accept higher risks, equity funds could work well.
For moderate risks, consider balanced or hybrid funds.
If you prefer lower risks, explore debt-oriented mutual funds.
Evaluate the Investment Horizon
The duration you plan to stay invested is crucial.
Equity mutual funds work best for goals above five years.
Debt funds may suit short-term needs, under three years.
Hybrid funds could balance risk and return for medium-term goals.
Actively Managed Funds vs Index Funds
While index funds follow a benchmark, actively managed funds offer certain advantages:

Active funds aim to outperform the benchmark through expert fund management.
Fund managers adjust portfolios based on market opportunities.
Actively managed funds provide higher flexibility and potential for better returns.
Disadvantages of index funds:

Index funds strictly follow the index and lack flexibility.
Returns depend solely on the market and do not outperform benchmarks.
During market downturns, index funds replicate losses without any adjustments.
Direct Funds vs Regular Funds
When it comes to direct and regular mutual funds, regular funds have distinct benefits:

Investing through a Certified Financial Planner (CFP) ensures proper guidance.
Regular plans involve professional advice tailored to your financial goals.
Direct funds require self-research and monitoring, which can be challenging.
Tax Implications of Mutual Funds
Taxation affects your net returns, so understand the rules:

Equity funds: Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%.
Debt funds: Both LTCG and STCG are taxed as per your income tax slab.
Choose funds based on post-tax returns aligned with your goals.
Avoid Investment Cum Insurance Products
If you hold LIC, ULIPs, or other investment-cum-insurance policies, consider surrendering them.
These products often provide lower returns and high costs.
Redirect funds into mutual funds for better transparency and higher potential returns.
Expense Ratio and Fund Performance
Check the expense ratio of the mutual fund, as it impacts net returns.
Opt for funds with consistent performance over 5-10 years.
Avoid funds with sudden spikes in performance, as they may lack stability.
Sectoral and Thematic Funds
These funds focus on specific industries or themes, offering high returns.
However, they carry higher risks due to limited diversification.
Consider them only if you have high-risk tolerance and market knowledge.
Role of Diversification
Diversify your investments across equity, debt, and hybrid funds.
This reduces risk while maintaining balanced returns.
Avoid over-diversification, as it can dilute returns.
Seek Expert Guidance
Consult a Certified Financial Planner for a personalized financial plan.
A CFP assesses your risk, goals, and taxation to recommend suitable funds.
This ensures your investments align with your overall financial strategy.
Monitor and Rebalance Your Portfolio
Regularly review your portfolio to align it with market trends.
Rebalance your investments to maintain the desired asset allocation.
Stay informed about changes in mutual fund performance and taxation rules.
Final Insights
Choosing the best mutual fund is not about selecting the highest return scheme. Instead, it involves aligning funds with your unique financial goals, risk tolerance, and investment horizon. Active fund management, proper diversification, and expert guidance enhance your chances of achieving financial success.

Invest wisely and focus on long-term benefits for sustained growth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

Latest Questions
Milind

Milind Vadjikar  |996 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Feb 10, 2025

Asked by Anonymous - Feb 10, 2025Hindi
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I am 51 single, divorced and have one little sister who is 32. Recently I lost my job, and I am not in the mood to search for a new one. I am in the process of making arrangement to fulfill my monthly needs. I am holding the NPS which has a small corpus of 5 lacs in tier 1 and 45k in tier 2. Now I want to completely exit from the NPS. Now I must compulsorily accept the 20% withdrawal and 80% annuity. I have a few queries below. 1. Should I consider buying 100% annuity. 20% withdrawal does not make sense 2. Should I consider putting 1.5 lacs more to enhance the annuity (The corpus will become 7 lacs approx.). 3. Should I consider taking out the annuity on a yearly basis (Please explain Its pros and cons), since it offers more benefit. 4. Should I consider the Shriram life insurance. 5. Will it be safe to consider Shriram life insurance for life long future annuity. It offers the highest annuity. 6. Should I consider Annuity for Life with ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases & 100% of the purchase price will be returned to the nominee(s). The annual offer is 49,063.00 (7.01%) 7. Should I consider Annuity for Life without ROP - Subscriber will get annuity for lifetime and on death of the Subscriber, payment of annuity ceases, and no further amount will be payable. The annual offer is 58,112.00 (8.30%)
Ans: Hello;

Point wise answers to your queries as given below:

1. Yes.
2. Yes.
3. If you do monthly annuity the rate will be lower but you get monthly payouts. In yearly the rate will higher but only one shot payment per year so it depends on your preference.

4. Cannot comment on suitability of xyz firm.

5. Consider an insurer which has good capital adequacy, growing profitable business, preferably listed, reputation of the owner/group apart from decent annuity rates on offer.

6 & 7. My suggestion would be to opt for annuity for life with ROP to your nominee. Ultimately it is your call.

Please have adequate healthcare insurance cover.

Best wishes;

...Read more

Milind

Milind Vadjikar  |996 Answers  |Ask -

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I graduated with a BBA in 2022, and since then, I’ve been on a thrilling two-year adventure at an MNC. But guess what? I decided to resign in March 2024 because, you know, who doesn’t love a little drama at work? Now, I’ve managed to burn through all my hard-earned savings like a pro, and here I am, utterly confused about my future. Sometimes I think about leaving India—maybe for studies or just to escape and do some mindless job somewhere. Other times, I dream of retreating to the most remote corner of India and living off the grid. I’ve always been pretty good with technology, snagged a degree, and even racked up some work experience. But now? I’m completely lost on where to start over. I’ve scoured countless articles and advice columns, but they’ve been about as helpful as a chocolate teapot. I’m just looking for that life-changing advice that seems to be in short supply. Turning 24 this year!
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My simple advice to you would be to get back to some job while you can continue to ponder over your long term goals/passion/pursuits.
Sitting idle (with no funds) at home won't help & it is not going to do any good to your career/life plans.
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Say you earnestly wish to pursue higher studies than you need to get yourself these answers 1) Why you need a higher degree in first place ? 2) Will it help you to get job/career of your choice? 3) If yes, then shortlist some relevant good courses & start exploring admit process etc. 4) Meanwhile do account for funds that will help you to time your break from the job (savings, loans etc.)
Likewise ask yourself questions for each option you have in mind & be honest in responses, that will help you to zero on your real aspiration & then do the proper detailing/planning. This may entail some compromises in short term but will certainly pave your way to achieve long term goals.

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Hello dear sir, I gave the 12th state board exam in 2024. I have given jee main three attempts I haven't given jee advanced exam yet . I have got less percentage in 12th , So will I have two more attempts for JEE Advanced? after doing 12th from state board and CBSE board?
Ans: Your question is not clear to me. Yes you can give JEE exam three times.

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Ravi

Ravi Mittal  |526 Answers  |Ask -

Dating, Relationships Expert - Answered on Feb 10, 2025

Asked by Anonymous - Feb 08, 2025
Relationship
Me and my girlfriend we both are in relationship from about last 2 years (almost). After such a long time I got to know that she had 2 relationships before me that too she didn't told I got to know it by third person she was sexually involved too (not intercourse but yes other things with one of them)... When I asked her that why you didn't told anything to me before she said she was scared that if she'll tell it to me so I'll leave her and she really did not wanted that... She was scared to loose me. And she was still in contact with that guy and when I asked her that why you were still in contact with him (it's been around 3 years they got separated) so she says that she is like that only... She can't deny anyone because of her soft hearted nature but she did not had any feelings for him. She also said that once she even went to meet him when he requested to meet and also on the same she claims that her soft hearted nature has done that she wasn't able to deny. I loved her too much but now all these things are hurting me like anything. (She is my first relationship before her i never had anyone)
Ans: Dear Anonymous,
I understand that you are hurt and the complexities of the hearts might be difficult sometimes to grasp. The first reason for your sorrow, her past relationship, and the fact that she was physically intimate with them is not completely justifiable. Though I understand that you feel hurt because she did not disclose it to you, still it should not matter so much as to ruin your present relationship. And whether she will open up about such sensitive details is actually up to her. It has nothing to do with how much she loves you or trusts you. Please understand that.

Now coming to the next thing, the fact that she is still in touch with them and has even met one of them, that is slightly concerning. It would have been okay if she did that openly- please understand that I am not saying she should have asked for your permission, but rather discuss the same with you. Moreover, in a relationship, it is also important to understand how much your partner is comfortable with- goes for both men and women. If you are uncomfortable with her relationship with her exes, she should consider that. I would have said the same if the table was turned. I suggest you have a clear conversation with her and express how you feel about this situation- depending on how she reacts and how the conversation goes, you both can think about the next step.

Hope this helps.

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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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