Retirement and planning
The longest horizon you will plan for, and the one where starting early matters most.
How much do I need to retire in India?
Start from your expected annual expenses in retirement, often around 70% to 80% of current spending, then adjust for inflation to the year you retire. A common rough guide is that you can withdraw about 3% to 4% of the corpus in the first year, which suggests the total needed.
Is EPF enough for retirement?
Usually not on its own, particularly for anyone whose lifestyle is well above their basic salary. It is an excellent foundation because it is automatic and government backed, but most people need an additional monthly investment alongside it.
Should I withdraw my EPF when changing jobs?
No. Transfer it instead. An amount that looks modest in your thirties would have grown substantially by 60, and withdrawing removes that growth permanently. It is among the most damaging retirement decisions people commonly make.
How much can my employer contribute to NPS tax free?
Up to 14% of basic salary plus dearness allowance under the new tax regime, for both government and private sector employees. Employer contributions to NPS, EPF and superannuation combined cannot exceed Rs 7.5 lakh a year.
What happens to NPS money at retirement?
You can withdraw up to 60% of the corpus as a tax free lump sum, and at least 40% must be used to buy an annuity paying a regular income for life. That annuity income is taxable at your slab rate. If the corpus is small, currently up to Rs 8 lakh, the whole amount can be withdrawn.
Which is better, ELSS or PPF?
They suit different people. ELSS has a three year lock in and full equity risk, so it suits someone comfortable with sharp falls and a horizon of seven years or more. PPF locks money for fifteen years, is government backed, and pays tax free interest.
How does the ELSS lock in work with a SIP?
Each instalment is locked for three years from its own date, not from the start of the SIP. A SIP run for five years therefore has money tied up for close to eight years in total.
How should I decide my asset allocation?
Start from when you need the money. Anything needed within three years should not be in equity, while money you will not touch for ten years or more can be largely equity. Then adjust for how stable your income is and whether you would genuinely hold through a 40% fall.
Should retirees keep money in equity?
Usually some. Retirement can last thirty years, so a portfolio entirely in deposits faces steady erosion from inflation. The sensible approach is to reduce equity gradually over the decade before retiring rather than moving out of it entirely on the day you stop working.
Should I buy insurance to save tax?
Buy term insurance because you need cover, not to save tax. Endowment, money back and unit linked policies sold as tax saving usually deliver weaker protection and weaker returns than buying term insurance and investing the difference separately.
Lessons behind these answers
Retirement investing
EPF, NPS and equity, and how to think about a 30 year horizon.
ELSS and tax saving funds
Equity funds with a lock-in that qualify for a deduction. Who they suit.
Asset allocation
How you split across equity, debt and gold, and why it decides most of the result.
Tax saving investments
Section 123, formerly 80C, and what actually qualifies.