Look Beyond EPF When Planning for Your Retirement

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Planning for Retirement

In India, when it comes to saving for retirement years, most young professionals prefer making investments into the Employee Provident Fund or EPF. Traditionally, EPFs have been a prominent and intuitive way to avail tax benefits, while reaping investment returns in a relatively risk less manner.

With the changing dynamics of Indian economy and tax structures; however, it’s becoming evident that from an investment and fund accumulation viewpoint, EPF investments are an insufficient and sub optimal means to grow money. Even if you’re investing in EPF, it is crucial for you to look at other diversified and better return yielding alternatives for a secure financial future. Here are some considerations that would prove the fact that youneed to see beyond EPF. 

Why EPF Investments Won’t Work as Expected?

Following are some crucial points of failure for EPFs that reduce their efficacy as a comprehensive investment instrument:

  • The legally sanctioned annual limit for investing in PPF is 1.5 lakh per annum. Even if you compound this amount throughout seven to eight years, it wouldn’t be enough to combat the rising inflation.When you look at the larger scheme of things; therefore, it is evident that you cannot entirely rely upon this amount to take care of your needs when you’re dependent on savings.
  • The interest offered might seem attractive to you now at around 8.5 percent. However, this number is an adequate return of only 2.5 percent if you factor in the rising costs of almost everything, with inflation accounted at a conservative 6 percent.As you can see, a mere 2.5 return isn’t a lucrative and practical investment, especially when you don’t have the support of a considerable corpus in your bank balance.
  • Since EPF is a long-term investment, it will block in your funds without offering the liquidity you might need to depend upon, say in case of an emergency scenario or life’s milestones where one tends to spend. Effectively, with EPF, hence, you’re blocking in money, without any significant gains, and maybe are forced to deal with budgetary constraints too at crucial moments in your life.
  • Lastly, but importantly, the tax savings might not be as attractive since EPF does not provide room for a joint account. Therefore, with more massive tax liability and maximum investment slabs playing their part, EPF investments often cutout the flexibility for your co-signatory to invest on your behalf at any point in time for retirement.

How to Save Then?

Considering the above points; therefore, an excellent investment to help you save for your retirement will be one that –

  • Helps to grow your money to a fund size that can benefit you
  • Provides a sense of flexibility when you need it, especially at critical milestones in life
  • Avails tax saving benefits, so that your disposable income increases in the present day
  • Takes care of the safety and security of your investment, so that you don’t lose out on hard earned money in pursuit of life’s trivialities

With a Unit Linked Insurance Plan (ULIP); hence, you can help your money to grow with disciplined investments while availing an unparalleled life insurance protection along with all the benefits mentioned above.

What is a ULIP And What Makes It A Good Choice?

Essentially, ULIPs are a combination of insurance and market-linked investments. As a result, they allow you to invest in financial instruments like stocks, bonds, and mutual funds to earn steep gains while being protected under a life cover.

With a ULIP investment; therefore, you stand to gain more than just savings for your retirement fund. You get the chance and freedom to allocate your money into a variety of funds to create a diversified portfolio of debt and equity investments. Simultaneously, you will receive comprehensive coverage from any eventualities.While benefits of ULIPs are plenty, sometimes policyholders have concerns about managing the risk overall as the market conditions change. You need to relax!

ULIPs from reputable insurers in India are designedto handle market volatility. These plans are not only flexible but also give you the freedom to allocate your money between high performing fund options according to the market changes.

ULIPs from Max Life insurance and other prominent insurance providers also provide you with the flexibility to mitigate your risk exposure as your age advances, along with an array of tax benefits. You can not only avail entry advantage on your premium payments but can also change the debt-equity allocation ratio, completely tax-free. Lastly, you are entitled to receive tax-free maturity benefits as applicable under Section 10(10D).

Hence, you must look at planning your retirement more objectively and place your fund where they’re the safest and yet have the potential to grow the best. Remember, EPF investments are a form of retirement planning, they are not “the only” form!