'Your EPF Withdrawal Is Tax-Free, If...'

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Anonymous: I will turn 43 years old. I have been investing Rs. 10000 in mutual funds via SIP since 2015. I increased this amount to Rs. 40000 in 2023. My current portfolio value is at Rs.26 lacs. I had redeemed Rs. 11 lacs due to some financial emergency.
Apart from that I hold Rs. 24 lacs in Stocks. I have a PPF account with Rs. 9.42 lacs. An LIC policy with Rs. 3 lacs lumpsum and an education plan for my daughter (who's in 8th standard) with sum assured as Rs. 20 lacs.
I wish to retire at 60. I have my own home which is loan free. Do I need to make changes in my investment strategy? Thank you.

At 43, you've built a strong financial base with diverse investments in mutual funds, stocks, PPF, and insurance policies. Your Rs. 26 lakh mutual fund portfolio and Rs. 24 lakh stock investments, along with a Rs. 9.42 lakh PPF, give you a good mix of equity and fixed returns. Increasing your SIPs to Rs. 40,000 was smart, allowing for faster wealth accumulation.

For retirement at 60, you should continue your SIPs, aiming to grow your mutual fund corpus significantly. Focus on increasing contributions when possible and reviewing the performance of your portfolio regularly.

Stocks are volatile, so ensure your stock allocation doesn't overexpose you to risks -- gradually moving some of it to safer options like debt funds as you near retirement can help reduce risk.

Your PPF and LIC policies act as stable components but may not yield high returns, so prioritising equity growth until your 50s could be beneficial.

To ensure you're on track for retirement, continue contributing towards your daughter's education plan and monitor its growth. With a sum assured of Rs. 20 lakh, it should help cover a portion of her higher education costs, but you may want to increase investments or set aside additional funds as tuition fees could rise by the time she enters college.

Considering you want to retire at 60, aim to build a corpus that can comfortably cover your post-retirement expenses for at least 25-30 years. Since your monthly expenditure and lifestyle may evolve, it's wise to reassess your financial goals periodically.

Given that you're debt-free, have a loan-free home, and have a strong financial portfolio, your current strategy is sound. However, as you get closer to retirement, start focusing on diversifying into safer, low-risk investments such as debt funds, bonds, or retirement-focused products, ensuring stability while preserving capital.

Keep a mix of equity for growth and debt for security, adjusting the proportions over time, is important.

If you think that there should be and handholding then consider a financial advisor with adequate knowledge and skills to help you achieve your goals.

Anonymous: Hello Sir, I am 50 year old male, I have MF portfolio of 23 LAC of current value, and SIP of 18000 pm. I have invested in 3flats + commercial properties (current value1.8 cr) having rental income around 55000. I am having my own house.
I am a freelancer, getting around 15 lac per year in that business. Would like to what i can do have a comfortable living after 60 years of age. I have feeling that I had invested more on real-estate ignoring MF. Pls advise,

Dear Friend,

Given your substantial real estate investments, you can make a few strategic adjustments to ensure a comfortable retirement after 60.

Diversify further into Mutual Funds: Since you feel you have over-invested in real estate, increasing your mutual fund exposure can balance your portfolio and help provide more liquidity and growth in the long term.

Increase SIP: You're currently investing Rs 18,000 per month in SIPs. Gradually increasing this amount could lead to better growth over time. Since your goal is retirement, focus on equity mutual funds with the potential for higher returns over the next 10-15 years.

Consider a Retirement-focused Fund: You could add retirement or balanced advantage funds to your portfolio, which reduce risk as you approach retirement age.

Create a Target Corpus for Retirement: Assuming you retire at 60 and live until 80, estimate your future expenses (including inflation). Given that you have real estate generating rental income of Rs 55,000, you can also expect this to grow with inflation. But, for other living expenses, a mutual fund corpus will give you the flexibility to withdraw when necessary.

Balance Real Estate and Financial Assets: While real estate generates good rental income, it is less liquid than mutual funds. Consider diversifying your overall portfolio by slightly reducing your real estate holdings (if feasible) and directing that amount into a more liquid asset class like mutual funds or fixed-income investments.

Emergency Fund and Health Insurance: Ensure you have an adequate emergency fund and increase your health insurance coverage, as healthcare costs tend to rise with age. Your current rental and freelance income can help you build this up over time.

Focusing on these strategies can help you achieve a balanced approach to retirement planning that includes growth, liquidity, and stability.

Anonymous: Hi all, I am 35, married and 4yr kid, and have just started my investment journey in 2024 and i would like to invest to acquire corpus of 5CR

Hi Friend,

First of all, I would like to congratulate you for considering being financially independent and finding out your requirement for a corpus of 5 CR. you are at the age of 35, which means you have another horizon of 25 years, considering you are going to retire at 60.

Second, you said your kid is 4 years old, which means the kid will graduate in the next 14 Years -- post-graduation in 20 Years and marriage in 23 to 25 Years, that is, by your retirement time.

To achieve your goal of Rs 5 crore corpus, it's important to have a structured investment plan that balances risk and growth over time. Here's a strategy to help you move toward that goal:

Set Clear Timeframes. Investing in Equity Mutual Funds, such as Large-cap, Mid-cap, and small-cap funds, Index funds, and flexi-cap funds, can help you diversify while mitigating risk.

If you invest Rs 1 lakh per month with an expected annual return of around 12% (CAGR), you could reach a corpus of Rs 5 crore in approximately 20 years. However, you need to review your investments regularly to stay on track.

Bharat: Dear Sir, I am working in IT industry for past 20 years and have worked in multiple companies (10) and have not worked in any company for more than 4 years. I have EPF corpus for 25 lacs. So I am part of EPF for past 20 years but I don't have continuous EPF in any organization for 5 years. If I withdraw EPF will it be taxed at my income tax slab.

About EPF Continuous Service: Since you've been contributing to EPF for 20 years across different companies, your overall service with the EPF remains uninterrupted.

About Tax-Free EPF Withdrawal: According to EPF rules, if you have completed 5 years of continuous service (which includes service across multiple employers without withdrawing the balance between jobs), your EPF withdrawal is tax-free. So, despite changing jobs, your service duration with the EPF is counted collectively.

Since you've been contributing for 20 years without breaking the EPF continuity, your withdrawal will not be taxed. You can withdraw the EPF corpus of Rs 25 lakh without worrying about it being taxed at your income tax slab rate.

However, if at any point your EPF service was discontinued and restarted (without a transfer of funds between accounts), the period might reset, leading to taxation concerns. If you are unsure, you could consult with your EPF office or a tax advisor to confirm your exact status.

Think about linking all the old accounts in to the current account so that your continuity of service can be verified by PF authorities. Now EPF office have started unified account and you linking your old accounts to the latest account will give you combined value and tax benefits.

ASHOK: I AM 69 YEARS OLD.STILL WORKING IN BANGLADESH.BUT NOW WISH TO QUIT JOB AND SETTLE DOWN .HAVE AN INVESTMENT OF 1.7 Cr IN MUTUAL FUNDS.HAVE 3 FLATS ONE COMMERCIAL PROPERTY THOSE WILL FETCH RENTAL OF 1 LAC PER MONTH.ALSO HAVE INVESTMENT IN GOLD AROUND 35 LAC AND HAVE FIXED DEPOSITS AROUND 15 LAC.INSURED FOR HEALTH ME AND SPOUSE UPTO 10 LAC.IS IT SAFE TO QUIT/my monthly expenses won't be more than 60k.both kids well settled.

You seem well-positioned to retire comfortably, with multiple income sources and enough savings to cover your expenses. It's advisable to periodically review your mutual fund portfolio for stability and ensure that your health insurance is adequate. There are some Health insurances which add on insurance value every year for example 10 Lakh Health insurance will become 20L next year and 30 Lakh third year.

After spending 60K per month balance 40 K can be invested in Moderate MF to fetch 12 to 15 % return.

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Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this QnA or an attempt to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.