For private sector employees, contribution made in the Employees Provident Fund (EPF) helps build their retirement corpus. EPF is currently set to earn around 8.55% interest per annum. The contribution you make towards EPF is 12% of your basic salary, and your employer contributes the same amount. Out of the amount your employer gives into EPF, 8.33% goes towards Employees Pension Scheme (EPS), which earns no interest at all.

You can take out the EPF money in a lump sum before you turn 50, because afterwards it can only be taken as pension. As per the rules established by the Employees Provident Fund Organisation (EPFO), the pension will start automatically after you turn 58 years of age. However,
  • Will a 8.55% interest rate be able to accumulate a huge fund that will be enough to suffice your financial requirements after retirement in the inflated market of the future?
To be true, the answer is NO. To cater to your post-retirement financial needs, you must take the following steps:

Invest in an Insurance-Linked Retirement/Annuity Plan

Depending on when you want to retire, choose a retirement plan today. Suppose you are 40 years old now, you can go about your retirement planning in two different ways:

  • Invest yearly in a long-term plan
  • Choose a plan in which you can put in a decent amount of money every year for say, 10 years. Then you wait for another 10 years. By this time you reach 60, which is traditionally the time people retire in India, a considerable amount of pension will start coming into your bank account every month.

  • Invest one time in a long-term plan
  • Choose such a plan which doesn’t require you to keep paying instalments yearly. You pay a lump sum one-time premium and let the investment go into a vesting period of 20 years. The investment will fetch you a handsome pension once you are 60.
Make sure this retirement plan includes a life insurance factor in it as well. If something were to happen to you, your spouse or legal heir would get the full benefits of the policy. The plan will keep providing you pension for your whole life and then to your spouse’s lifetime.

Avail health insurance

You can also buy a health insurance plan with critical illness cover or a senior citizen’s health insurance plan to build a financial cushion against the spiraling expenses of healthcare and get covered in case of health-related emergencies.
Make sure to repay all your debts by the time you hang your boots to lead a stress-free retired life. If you are finding it difficult to manage expenses, seek help from a professional.

Click here to plan your retirement goals.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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