Prableen Bajpai Founder FinFix® Research & Analytics replies: You can broadly divide your allocation across three baskets– government schemes, other fixed income products and equity. Although the interest earned on EPF post-retirement is taxable, it is still worthwhile to keep the account given the low-interest-rate environment and withdraw in tranches. In the first phase, make a withdrawal of around Rs 80 lakh. Invest Rs 30 lakh (you and wife) in the Senior Citizens’ Saving Scheme (SCSS) which is offering 7.4%, paid quarterly. Invest another Rs 15 lakh in PMVVY on behalf of your wife. The RBI floating rate bond (7.15% currently, paid biannually) is a good option to ensure automatic readjustment in interest rates. For fixed-income products, since you already have FDs, debt funds can be added to enhance flexibility of withdrawal and tax efficiency. Choose schemes having high-quality portfolios and opt for a Systematic Withdrawal Plan. Around Rs 20-25 lakh should be parked in equity mutual funds (hybrid aggressive, nifty index fund) with a 7–10-year view. Do maintain around Rs 15-20 lakh in a separate liquid fund or sweep-in FDs for contingencies. As interest rates rise, start withdrawing the EPF corpus gradually and allocate between the three baskets. Readjust your portfolio for optimal results over the next one to two years.
I am 32. I need to build a corpus of around Rs 2.5-3 crore for my retirement at 60. I have been investing Rs 50,000 per year in PPF since 2014. I started investing Rs 50,000 a year in NPS from this year. I have also been investing Rs 2,000 a month in Canara Robeco Emerging Equities, Rs 1,500 in HDFC Balanced Advantage, Rs 3,000 in ICICI Prudential Value Discovery and Rs 3,500 in L&T Midcap Fund. I have Rs 15 lakh as a contingency fund. Will my investments help me achieve the target I have set?
Dev Ashish, Founder, StableInvestor and Sebi-registered investment adviser replies: You have mentioned that you are tagging your PPF, NPS and equity funds to the goal of retirement. But you haven’t mentioned your EPF corpus, which too is generally earmarked for retirement. Despite that, the target of Rs 3 crore for retirement in 28 years seems achievable with current annual investments of Rs 2.2 lakh a year for someone with a balanced-to-moderately aggressive asset allocation. If you can increase your annual investments by 5-10% every 1-2 years, you can easily achieve Rs 3 crore much before the age of 60. Your other goals might also compete for any investible surplus, so it’s up to you to decide whether to accelerate your retirement plan or not. It might be a good idea to eventually have a layer of medical contingency fund in your retirement corpus (by means of additional savings) for those uninsured, non-hospital-in-home medical expenses. As far as fund choices are concerned, they seem alright with one exception. It might be a good idea to have a large-cap index fund (Nifty or Sensex-based like HDFC or UTI’s Nifty50 Index or HDFC Index Sensex Plan) to bring in pure-play large-caps into the portfolio. This index fund can be a replacement for the dynamic allocation or the value fund. Switching from regular to direct plans can increase your returns over time.