Queries

Invest Well For A Healthy, Happy Retired Life

Rohit Kapadia, Pune rohitk@gmail.com

I am 35 years and am looking at a corpus of Rs 1 crore when I retire at 60. How much should I save every month, and where should I invest?

To accumulate a corpus of Rs 1 crore till you reach 60, you need to save Rs 6,000 every month. However, this is not enough to plan retirement.

While planning a retirement corpus, you must consider the cost of living and roughly calculate the monthly expense of those 25 years (considering 8 per cent average rate of inflation).

Considering 85 years as maximum probable life expectancy, invest and accumulate a corpus, which will be sufficient to take through a comfortable financially independent retirement.

If your expenses are Rs 50,000 a month, then you require Rs 3,42,000 every month after retirement and a corpus of Rs 10.27 crore is needed for a comfortable inflation-proof monthly income. To lead a retired life with the stated corpus, you must invest Rs 60,000 per month at 12 per cent average return throughout the investment and earning year.

Please contact a certified financial planner to guide you through this.

HINA SHAH, Certified Financial Planner, LUHEM Financial Planner And Coach

Mudra Kapoor, Mumbai Mudra.s.kapoor@gmail.com

I have joined a new organisation, where I am getting Employees’ Provident Fund (EPF). They have also given me the option of the National Pension Scheme (NPS). Could I get both Provident Fund (PF) and NPS from my new employer? Also, could I continue contributing to my NPS even if I opt for my employer to contribute to my NPS? Which would be a better option for me?

Yes, You can opt for both NPS and PF from your employer. Also, you can continue self-contribution to NPS, even as your employer contributes.

Your tax benefits are as follows:

• Your PF contribution is allowed as a deduction under Section 80C, wherein the maximum deduction amount is Rs 1.5 lakh.
• Your self-contribution to NPS is also eligible for a deduction under Section 80C. However, most of us exhaust this limit easily through other investment options like life insurance premiums, equity-linked saving schemes, or PF. In that case, you can claim deduction under Section 80CCD (1B) for up to Rs 50,000 for self-contribution to NPS.
• The contribution made by the employer to NPS is further allowed as a deduction under a separate Section - Section 80CCD(2), subject to a maximum of 10 per cent of your basic salary and dearness allowance. 
• Hence, you can claim tax benefits under three different sections, and take it to over Rs 2 lakh.

It is good to opt for the company contribution to NPS in case you are falling in the 30 per cent tax bracket. In case you are in the 20 per cent tax bracket or below, you can choose employer contribution to NPS if it fits your requirements, as your in-hand salary will reduce to that extent.

NPS is meant for those who are exploring means to save for their retirement years.

Uma S Chander, Certified Financial Planner, Handholding Financials

Swapna More, Thane Medreamz@gmail.com

I have left an organisation, where I worked for the last 12 years to start on my own. Now I am self-employed. I want to withdraw the entire Employee Provident Fund (EPF) from that organisation. Will it be taxable? Also, will I get any interest in this PF?

Dear Swapna, since you were in service for more than 5 years, your EPF withdrawal is exempt from any kind of tax. As for interest after leaving your job is concerned, there is an accrual on the balance in the PF account. However, the interest that you earn on your PF after leaving your job is taxable. Your PF account will become inoperative if you do not apply for withdrawal (full or partial) within 36 months from the date you became eligible to make the withdrawal application. After the account gets inoperative, it does not earn further interest.

Uma S Chander, Certified Financial Planner, Handholding Financials