[nitinkbhaskar]

Thank you OP for this wonderful topic. Very insightful information !!

Originally Posted by V.Narayan

Own your own accommodation: At 70 you will not have the energy or ability to cope with changing rented accommodation constantly like you can at 30. The body ages, the mind slows down, attitudes harden and most importantly you are less 'wired in' and less nimble.

Sir,

Can you please share more thoughts on this. I have an opinion that investing in a real estate would be far less rewarding than other instruments. Hence, the extra income from other instruments can go in the rental + expenditure. A real world perspective from your end or others would really help me here.

[AZT]

Originally Posted by kavensri

So, my point is, VPF is kind of under-estimated investment plan. Many people would not realize the potential as the contribution to VPF fetches the same interest as EPF.
Apart from VPF, I have been investing in these government schemes.

Thanks for this. Shall screenshot for future reference. Some good advice

[sagarpadaki]

I would suggest not to go overboard with debt instruments for long term goal.

Investing in PPF/VPF/SSN is fine. But maxing them out just to get tax benefits is like missing the wood for the trees.

For 10+ year goals, one should have good amount of investment in equity(direct/indirect) .

Asset allocation is most important. Periodically tracking the investments and re-balancing the equity:debt ratio is necessary. So is the step-wise reduction of equity exposure and increase the debt part as one nears the goals.

PPF/VPF/SSY and other government interest rates are reducing and will continue to reduce. The government has realized that it cannot give such high rates when the market is not reflecting the sentiments. So if one relies only on such debt instruments for long term goals then the investment would not even beat inflation YoY.

Stay away from NPS . If you are compelled to invest in NPS(Govt employees are) then choose the debt plans and not the equity. NPS equity plans have the lousiest returns.

[kavensri]

Originally Posted by sagarpadaki

Stay away from NPS . If you are compelled to invest in NPS(Govt employees are) then choose the debt plans and not the equity. NPS equity plans have the lousiest returns.

The main reason for me to invest in NPS is the tax savings benefit (31.2%).
As there is no upper limit for section 80 CCD(2) and 50000 additional tax benefit under 80CCD(1b), it was an easy decision for me to go for NPS.
I started my NPS in 2017. My overall returns is at around 10%. This is even after the market went down this year.
And, I have opted for ‘Auto’ option, the equity share is around 29% calculated based on my age.

[sunilch]

Originally Posted by nitinkbhaskar

Thank you OP for this wonderful topic. Very insightful information !!



Sir,

Can you please share more thoughts on this. I have an opinion that investing in a real estate would be far less rewarding than other instruments. Hence, the extra income from other instruments can go in the rental + expenditure. A real world perspective from your end or others would really help me here.

He is referring to the troubles involved in moving your rental accommodation multiple times in your life. With age there are many problems that will come up and constantly moving every few years will be more pain than the financial gain that you are calculating right now.

Documentation, schools for kids, workplace distance, support system (relatives, friends, neighbors, etc.), trusted doctors and hospitals, etc are some of the things that change in priority over time and those few thousand rupees that we may save with rental accommodation.

Of-course not everything may apply to you or a person in particular. I mean if one remains single throughout their life then nothing like it. You don't want to tie yourself to a house in that case

[libranof1987]

Originally Posted by V.Narayan

Let me share my experience and I hope it will benefit our readers.

As good as they get!

Will: Write out a will and get it registered. Less hassles for your folks after you're gone. Also less scope for quarrels.

I realize this might not appeal to a lot of readers but here are a few additions to this specific document (Will), based on thoughts from my own immediate/ extended family.

1) The Right to Die: given how certain stages of one's life: eg. when placed on the ventilator, being physically incapable or mentally incoherent, can be excruciating for the person, you can insert a clause in your Will to be allowed "to go" when the light at the end of the tunnel don't shine that bright

2) Donate your body to research: one final act of charity towards science?

[RockingHorse]

I am a qualified CA myself but I will still stress upon the importance of a qualified independent financial advisor. The other professionals like your CAs, lawyers, tax consultants, share brokers, bank managers are not necessarily adept at providing you with a tailor-made and independent financial advice. Agents who are middlemen for selling MF and insurance products are no good either.
Financial planners are a blooming and much required professionals in India. So better pay them a pre-set fees and get set up financially. I do not have any personal or professional interest in doling out this advice.

[Turbolove]

Originally Posted by kavensri

1. PPF (two separate accounts) and that too by depositing 1.5l in each of the account before 5th of April.

Noob question here from someone just starting their career. Can a single person have 2 PPF accounts and deposit 1.5 lacs in both and claim a total of 3 lacs unnder 80C for a single financial year ? I was under the impression only 1 account and a total limit of 1.5 lacs under 80C as a whole.

[bluevolt]

For retirement purposes, I feel PPF, EPF is good enough.

NPS structure is not investor-friendly due to following reasons -

• Lock-in is too long (This is a subjective reason)
• Compulsory Annuity purchase of 40% corpus value
• Low annuity returns currently ~6% or below (Will be even lower when you will actually retire).
• Annuity returns are taxable.
• You are basically deferring your tax in NPS as money saved for claiming additional 80c benefit will be somewhat deducted when you actually need it.

I think if you continue investing in PPF and keep it extending in 5 years batches, you will have a good sum of money due to compounding effect and at best, you won't have to pay a single rupee in tax.

Apart from PPF, EPF, I suggest the following tools -

• A number of FDs in government banks/large private sector banks
• Sovereign gold scheme. Keep buying when you are young, reap the benefit when you are old. You keep getting 2.5% interest every six months as well even when you are young.
• Few stocks of large-cap companies like Maruti, TCS etc (Do your own research, these names are just for example).
• Few good large-cap mutual funds.

Off late, I have moved my investments from equity to debt as some of my holdings has given me good learning and setback (DHFL, IBHFL, Tata Motors). May be post COVID, I may regain interest in equities.

Other than tools, suggest following lifestyle caveats that help preserve money, remember money saved is equal to money being earned -

• Drop Gen X, Y, Z attribute of replacing everything often be it phone, car, home appliance etc.
• Keep your car for at least 10 years to extract the maximum value of your money.
• Don't buy high-end phones (flagships) every 1-2 years! I buy a good phone and keep it until it is broken.
• No debts, no car loans. Will not buy if I can't afford.
• Avoid flashy lifestyle. It is not necessary to replace your shoes every six months, your watch every year and so on.
• Just live within your means, don't let advertisements fool you.

[nitinkbhaskar]

Originally Posted by Turbolove

Noob question here from someone just starting their career. Can a single person have 2 PPF accounts and deposit 1.5 lacs in both and claim a total of 3 lacs unnder 80C for a single financial year ? I was under the impression only 1 account and a total limit of 1.5 lacs under 80C as a whole.

Quick answer is NO.
You can avail Tax benefit for ppf (even if you have multiple accounts in different banks) upto the 80c ceiling (i.e. 1.5 lakhs)

[kavensri]

Originally Posted by Turbolove

Noob question here from someone just starting their career. Can a single person have 2 PPF accounts and deposit 1.5 lacs in both and claim a total of 3 lacs unnder 80C for a single financial year ? I was under the impression only 1 account and a total limit of 1.5 lacs under 80C as a whole.

No, you can open only one account in your name. When i mentioned 2 accounts, it is mine and my wife's account.
But yes, one can also open an account on kids name with either of the parent becoming guardian for that account. In that case, you may end up having two accounts and combined amount from those 2 accounts must not exceed 1.5l.
The advantage of opening the account on kids name is, by the time they grow up, you already have an account which has completed initial 15 years block-in period. Then the subsequent block-in periods are only for 5 years.

[V.Narayan]

Originally Posted by nitinkbhaskar

Thank you OP for this wonderful topic. Very insightful information !!

Can you please share more thoughts on this. I have an opinion that investing in a real estate would be far less rewarding than other instruments. Hence, the extra income from other instruments can go in the rental + expenditure. A real world perspective from your end or others would really help me here.

Dear Nitin Bhaskar, thank you for your question. These calculations financial advisors may show you are paper calculations that do not adequately take into account the ups and downs in markets, interest rates, inflation, your investment decisions going sorrowfully wrong and most importantly variations in your own fortunes. The last mentioned being the most important. 30 to 40 years is a long enough time for things to turn up side down in any one's life - job loss, demotion, bankruptcy, loss of spouse, prolonged recession, huge expenses on parental health etc. If a person lost his job would he want to be living in his own house or in a rented flat? Similarly when you reach old age when you are really coasting only on built up kinetic energy {your savings and investments} with inflation and health surprises eating into your reserves you don't want to have the additional burden of paying rent for 240 to 300 months after 60.

The problem with financial advisors is that they are trying to teach you how to navigate your way up a steep hill with a narrow slippery path without ever having walked it themselves. I hope this helps. Health Insurance and a home are best secured before you turn 40 - just one old man's advice. Others may differ.

[zensure]

Biggest attraction of EPF and VPF at present are tax benefits - EEE. That is Exempt, (at the time of investment), Exempt(while interest is being accrued) and Exempt (while receiving the matured proceeds). It is just a matter of time this changes. We have already seen this in NPS and 2004 onwards all the govt employees are no longer on EPF and compulsorily on NPS. Further, we have had north of 8.5% interest rate for EPF for quite sometime and PPF interest rate has comedown significantly. Labor ministry has proposed 8.1% as the interest for EPF for FY20; it is yet to be approved by Finance ministry. Long and short of all these is that eventually EPF and PPF will lose its allure and the way interest rate is is being revised downwards I guess it is just a matter of time it will be around 6% range. Besides, you can only invest a max of 150K Rs per annum. So over all the corpus that can be built with this is limited. Same goes to EPF too since return will be low going forward. Hence those in their 30's should seriously look beyond PPF and EPF.

That brings us to Annuity. It has improved significantly in the last couple of years. You can find many of them returning in the range of 5.5% to 6.9% depending on the time of investment and premium return. There is one important factor being overlooked by most of us. The corpus is being built around 5.7% to 6% rate. Once the corpus is built you will get about 6% return on that. Here is the beauty - you don't pay tax to the return portion on the corpus; this is an overlooked part. Once you factor this, the annuity can be quite attractive - considering it is guaranteed with the T&C agreed. Hence, I think a portion of your savings can be channeled to Annuity now.

I believe those who are under 40 seriously should consider NPS. It has changed significantly for the better over the years. You can not get investment options where fund management charges are almost NIL.

FD can only be small portion - in smaller chunks for emergency purposes. It is least tax efficient.

You got to have some portion depending on your risk appetite in equities. If you are not market savvy or can't afford give time to track the stocks Mutual Fund is better suited. Only equity can beat the inflation and none of the debt options like PPF/EPF/FD.

[sachinayak]

Originally Posted by sagarpadaki

Investing in PPF/VPF/SSN is fine. But maxing them out just to get tax benefits is like missing the wood for the trees.

For 10+ year goals, one should have good amount of investment in equity(direct/indirect) .

While in a long term equity will certainly give you better returns, the bigger question is would you be okay with the bumpy ride on the way. For many it would be okay, but for some it may not.

I completely believe in VPF. Had started contributing to VPF ever since the EPF portal went online (I at least need to see the balance in my account, to trust the system). Over the last few years, any time there would be a salary hike, the differential amount I would move it to VPF keeping my take home constant. Anyways its a mental thing, no matter the hike you always get used to it in a couple of months. Then 2 years back, i just maxed out on my VPF contributions (i.e. 88% of my basic salary, since 12% was already going as my mandatory contribution earlier). This is not for tax-benefit now, but simply put I do not see any other mode of investment that will return a 8+ percent return, Tax-Free and with no risk. While everyone expects government to wave back some of the benefits, it is not easy. Any changes to EPF (unlike PPF) becomes a big political issue with labor unions and not many governments would want to face the backlash.

With increased risk in debt funds, reduced opportunities in alternate "Safe" investments, VPF is the best option, in my opinion for those who do not want fluctuations (albeit interim).

[asbshyam]

Excellent thread, thanks for the tips and advice. Made me think twice about my retirement plans.

Are there other deposit schemes that yield well, but are still safe? I understand the lion's share of a retiree's corpus should be safe in instruments like PMVVY, SCSS, Post Office and similar. But all of these have a cap of 15L each. Assuming the corpus to be about a crore, what would be other safer options that yield a monthly or quarterly returns.

One example for what I'm asking about is the TNPFC, while it does not appear to be safest, the yield is pretty decent. While Bank FDs are still an option, I just want to find out about other similar products are available that are better balanced in terms of risk and returns.

And how do you decide risk vs returns prognosis when you look at an FD from NBFC vs a Nationalized bank (Example, Bajaj Finance FD vs SBI FD). Assuming and hoping that the major NBFCs recover to their former glory post COVID, what are the general factors that a lay man should look at?