Retirement Planning: In these five ways, you can make your retirement better. You can increase the monthly pension by ensuring more money in the PF account.
Retirement Planning: Most of the people depend on monthly pension to meet their daily financial needs after retirement. However, if you manage your life-long capital Employees Provident Fund (EPF) and gratuity with the right strategy, then your financial condition can be strengthened after your retirement. While planning for your retirement, focus should be on your lifetime savings. You can improve your retirement in these five ways and increase the monthly pension by ensuring more money in the PF account.
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Allow money to grow in EPF account
In the current era, EPF is getting the highest interest among debt funds. The interest rate on this is currently 8.5 percent. After the last working day, the money deposited in your EPF gets interest for 36 months i.e. if you worked till 31st March 2022, then the money deposited in the EPF account will be paid for three financial years before the closure of this account- FY 2022, Finance Interest will be available for the year 2023 and the financial year 2024. Compound interest is available on the money deposited in the EPF account, that is, you not only get interest on the principal deposited money but also get interest on the interest. In such a situation, if you do not need a lot of money, then do not make the mistake of withdrawing money from the EPF fund. After three years, you can withdraw the entire amount from the EPF account or you can withdraw money little by little so that interest remains on the remaining amount.
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settle your financial liabilities
Settle all your financial liabilities like home loan, car loan or any other loan installment, then pay it off as soon as possible. You can use your PF and gratuity amount to pay it in lump sum or can opt for regular pre-payments.
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Avoid investing in high risk options
Invest your money in different asset classes according to your risk appetite. This means that if you cannot take more risk, then due to high returns, you should avoid investing in high risk options. For this, you can choose debt oriented products with low to moderate risk. For this, you can look at options like PPF, Balanced Advantage Schemes of Mutual Funds, Debt Oriented Hybrid Mutual Fund Schemes and lump sum investment in Post Office Savings.
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Ensure regular cash flow
Apart from monthly pension, ensure regular cash flow through regular interest or dividend payments. You can consider the option of paying monthly or quarterly interest in post office savings according to your needs. For example, if you invest Rs 10 lakh in Senior Citizens Savings Scheme (SCSS) for 5 years, then according to the current interest rate of 7.4 percent, you will get Rs 18500 every quarter. In this way, in five years, you will get Rs 3.70 lakh as interest only and you will also get your capital of 5 lakh. Similarly, you can either opt for the dividend option or add the option of Systematic Withdrawal Plan (SWP) in mutual fund investments.
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Build an emergency fund and buy a health insurance policy
It is very important to prepare an emergency fund for any contingencies. After retirement, at least Rs 5 lakh can be immediately available with you in the form of cash, it must be arranged. This money can be used for any medical emergency or any other special needs. This money can be kept in regular bank deposits or liquid mutual fund schemes. Another very important preparation for medical expenses is buying a health insurance policy. You must have a health policy with good coverage so that the medical expenses do not add to the financial burden.
(Article: Adil Shetty, CEO, Bankbazar.com)
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