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Mr. Jain, a 60-year old hard working man retired this year after an illustrious career. He currently has Rs 1 Cr. as his retirement corpus. He also had other sources of income such as rents from properties and based on this he came under the 30% tax bracket. His current financial objectives currently are -                1)  Receive a steady income post retirement for his family                2) Preserve the corpus for distribution for his children His first thought was to invest his entire retirement corpus in a bank fixed deposit and achieve a 7% interest – giving him an annual income of Rs. 7 Lacs (pre-tax). Mr. Jain came to us with his corpus asking for advice on other options. We told him about debt mutual funds which have favourable tax treatment and about the concept of a Systemic Withdrawal Plan (SWP). SWP is a feature provided by Mutual Funds where an investor can withdraw a fixed sum as desired from the initial lump-sum investments. He can also factor in an incr

Dear Readers, .  Hopefully our earlier article would have given you a good idea on what annuity is and how does it impact your retirement income. An annuity is preferred by retirees because it provides a sense of security that they will continue to receive money each month for the rest of their life. One may choose to receive fixed payouts at intervals (monthly, quarterly, half-yearly or annually) that suits them best. However, as we explain in the next sections, there are several shortcomings to annuity schemes and investors are better off by investing in debt funds. Methodology: We have made a comparison study of immediate annuity and debt mutual funds. For the analysis of annuity, we have chosen 6 immediate annuity plans as shown in the below figure.   To make the calculations simple we have chosen the option “Life annuity with purchase price return” to analyse the returns provided by the above insurance companies. We have analysed this for a person of 60 years o

Recently we received a few questions on annuities and many expressed an intent to invest in Annuities. We are writing this article to give a brief introduction about annuities and why they may not be the best option for you as a retiree. Annuities – A brief introduction : A typical annuity scheme requires the investor to make an investment into a scheme which will then provide a fixed monthly income after retirement until the scheme holder’s death. Investors can typically choose from the below payout options of an annuity scheme: ·      Annuity Payable for Life : The retiree receives a fixed income paid at regular intervals throughout the insured’s life. This income automatically stops on the annuitant’s death. Please note that there is no return of the premium paid. ·      Annuity Payable for Life with a Guaranteed Period : The annuity is paid for a certain period and thereafter till the annuitant is alive. The shorter the guarantee period, the higher the fixed income p

In this article we compare the investments in Provident Fund (rather Voluntary Provident Fund) and that made in Equity Linked Savings Scheme (ELSS). Most of the salaried class invest in Provident Fund (PF) that falls under Section 80C for tax saving purposes. A few clients also prefer investing in Voluntary Provident Fund (VPF) and Public Provident Fund (PPF) to meet the 80C requirements. We have done a comparative study of ELSS vs PF to see which investment avenue amongst the two is better. We have taken last 10 years of actual data for the purpose of this analysis.  We have taken Rs 1,50,000 invested in PF on 1 April, 2008 & a similar amount invested in Aditya Birla Sunlife Tax Relief 96 Fund. This is done for next 10 years. We can give calculations of any other fund with any other assumption. The calculations are given below: The table above shows that Rs 1.5 Lakh invested every year for 10 consecutive year leaves you with a corpus of ~ Rs 28 Lakh Now let us con