Learn finance, banking, risk, data science and fintech

Think Beyond EPF for a Wealthier Retirement

(Image Source: Shutterstock)

In today’s age of rising inflation and medical expenses, it becomes crucial that you pay more attention to your retirement planning. With a comprehensive retirement plan, you can easily save money to fund your lifestyle after your working days are over. As such, you need to find the right balance between your risk appetite and investment returns.

Your retirement savings strategy should also go beyond the traditional Employees’ Provident Fund (EPF) contributions. The reason behind this is simple: EPF investments are a suboptimal means to maximise your savings. There are other products as ULIPs that offer better investment return and fund accumulation propositions.

Even if you are already investing in an EPF, it is crucial that you look to create a diversified investment portfolio for a secure financial future. 

Why Aren’t EPF Investments as Prominent as Expected?

EPF investments work as a sub-par investment instrument because of the following:

  • You can only invest up to Rs. 1.5 per annum into an EPF account. Even if you compound this amount for up to, say eight years, it still would not be large enough to mitigate the effects of inflation and rupee devaluation. Without any regular source of income in your retirement years, you cannot rely on the EPF proceeds to take care of your expenses.  
  • For FY 2018-19, the rate of interest for EPF is increased up to 8.65%, which may seem an attractive proposition. However, this number is rendered ineffective once you factor in the rising lifestyle costs due to inflation, accounted at 6%. As evident, you cannot expect a mere 2.65% return to be either a lucrative or a reasonable investment, especially when you don’t have any other form of savings.
  • Given the fact that EPF is a long-term investment product, your invested money would be allocated to different fund options, without offering the liquidity you may need, say in the case of an emergency. Effectively, with EPF, hence, you are putting away your money, without any significant gains, and the chances are that maybe you will have to deal with budgetary constraints too at crucial moments in your life.
  • While EPF plans offer tax savings, these deductions may not be as significant attractive, because EPF has no provisions for a joint account. Thus, with immense tax liability and maximum investment slabs playing their role, EPF investments may not offer the desired amount of flexibility for your co-signatory, in case they decide to invest on your behalf after you have retired.

How to Save for Retirement Then?

Given the fact that EPFs have their fair share of limitations, you need to reconsider your earlier retirement planning strategy. Here’s how you must approach saving for your retirement:

  • Select an appropriately large fund size that may suffice your retirement years
  • Include both long-term and short-term investment instruments into your portfolio so that you have adequate flexibility to shuffle around, especially at important milestones in life
  • Maximise your tax savings through investments and savings, so that you may have more disposable income in the present day
  • Safeguard your investments through adequate insurance life cover and risk management strategies, so that your savings are secure from the unpredictability of life.

Amidst all the market-linked instruments available today, Unit Linked Insurance Plans or ULIPs offer the best possible combination of wealth appreciation through disciplined investments and comprehensive life insurance protection, under a single policy.

What is a ULIP And How Is It A Good Choice?

Fundamentally, ULIPs are investment products that offer the dual benefit of life insurance and market-linked investments under a single plan. Therefore, these plans allow you to maximise your savings through investments into various financial instruments such as stocks, bonds, and mutual funds.

When you opt for a best ULIP plan in India according to your preferences, you stand to gain much more than just retirement savings. You get the opportunity and freedom to put your money into a variety of equity and debt-driven fund options; thereby, creating an expansive investment portfolio.

At the same time, you receive complete financial coverage from the unpredictability of life. While benefits of ULIPs are plenty, you also avail peace of mind knowing that your retirement savings are secure against the overall market risks.

EPF Is Only A Way, not the “Only Way”!

While EPFs are a popular investment option preferred by many risk-averse investors, you need to understand that they are not your only chance to accumulate sufficient retirement savings. You need to consider other investment opportunities as well and invest smartly so that your savings remain primarily protected from market upheavals. ULIPs are one such opportunity that can help you achieve your desired level of financial security post-retirement.

Reputable insurers in India such as Max Life Insurance offer ULIPs that can be personalised to handle market volatility as per your risk-appetite and future goals. Therefore, the best ULIP plan in India for you would be the one, which not only offers flexible withdrawal options but also gives you the freedom to choose where your savings are invested.

Moreover, ULIP plans offer an array of tax benefits under Section 80C and Section 10(10D) along with other functionalities such as rider protection and debt-equity allocation ratio management.

Try our courses on Data Science for Finance. JOIN FREE

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *

This site uses Akismet to reduce spam. Learn how your comment data is processed.