Estimating how much you need for retirement is hard enough. But even if you are able to do that, getting there is a tough task. In the second part on the series of retirement planning, Debashis Basu, editor Moneylife, focussed on the right way to invest
There is a maze of retirement products available in the market promising a secure retirement, but most of these products do not deliver, leave alone creating a sufficient corpus for retirement. In the second part of Moneylife Foundation’s two-part seminar on retirement planning, Debashis Basu, editor Moneylife, focused on how one can save efficiently to avoid the risk of underinvestment. Along with this, what steps one could take to protect his/her corpus post-retirement and if there is a shortfall what are the different options available were also explained.
“Retirement planning is very complicated because there are too many variables, many of which need to be assumed”, cautioned Mr Basu. There are too many unknowns before retirement, as well as post-retirement. Many are unaware of how much their expenses would rise after retiring. Once you have accumulated your corpus, where would you invest it? There are several other questions one needs to address while planning for retirement. One has to separate the set of factors that one can control and those that one can’t. One can control how much one saves and invests.
Even if you seek professional help, when investing for retirement you must understand the difference between quality advice and a sales pitch. Most of the unscrupulous relationship advisers and so-called wealth managers are often looking to build their own retirement corpus. “The least you can do is invest in products that grow to beat inflation” explained Mr Basu. For investing safely, one needs to understand the different products available and the risk & return associated. One of the benefits of starting early is that you can make the power of compounding work for your benefit.
Lack of a well-planned savings plan can leave you with much less money to spend on yourself when you have no income. The basic purpose of investing for any goal and especially retirement is to be able to beat inflation. Stocks and equity funds over the long run of 5-10 years have more often than not beaten inflation. Other products like bank fixed deposits and other fixed income products may not deliver high returns but offer safety of capital.
The main factor that determines how you should go about saving for your retirement is your age. Mr Basu explained how over different age groups from 21 to 60 one can invest in a mix of products, taking into account the number of years to retirement.
“One needs to use the same judgement for investments pre-and post-retirement”, said Mr Basu. Post-retirement one’s main focus is to protect the corpus. Here people have the option of immediate annuities, Senior Citizens Savings Scheme (SCSS) and MIP schemes, but none of these are great choices, said Mr Basu. In the post-retirement period, it is important to choose safe assets, for which bank fixed deposits are the best. However, the main issue here is, one does not know the future returns and how long one would live. Investing in fixed income products for the very long term may turn out to be imprudent because they don’t beat inflation. Retirees may like to invest some amount of money in equity mutual funds.
Since a lot of savers today have large home loans, they may end up saving less for retirement. They will have the bulk of their investment in real estate. Mr Basu said, “Reverse mortgage is an option for them, but it has failed as a product in India and may pick up in near future”
The session was followed by an engaging Q&A session which addressed topics such as investing in property, NPS as a retirement product and whether equity mutual funds are the best way to create long-term retirement corpus.
The agency’s action to attach these properties under PMLA is aimed at depriving the accused benefits of these assets which are created through the “proceeds of crime” and illegal means
The Enforcement Directorate (ED) is set to attach properties worth over Rs125 crore of the main accused in the Stock Guru scam—Ullas Prabhakar and his wife—under money laundering laws.
The agency has recently recorded the statement of the duo who are lodged in Tihar jail in judicial custody.
The agency had registered a regular case under the Prevention of Money Laundering Act (PMLA) sometime back after the couple was arrested by Delhi police last year.
Flats of the couple in places like Mumbai, Hyderabad, Ratnagiri, Nagpur and few other cities besides other assets like fixed deposits and cash with a total value of a little more than Rs125 crore will be attached and prohibitory orders will be used against their usage or operation by the concerned parties or anyone else, official sources said.
The agency’s action to attach these properties under PMLA is aimed at depriving the accused benefits of these assets which are created through the “proceeds of crime” and illegal means.
The ED would also widen its probe in the case and investigate the role of some Income Tax department officials who had raided the couple last year.
The agency had registered the money laundering case against Ullas Prabhakar alias Lokeshwar Dev and his wife Raksha alias Priyanka Saraswat.
The agency had sometime back told a Delhi court that interrogation and recording of statements of both the accused was necessary for proceeding in the ongoing probe and the ED’s investigators may be allowed to examine them in jail.
Chief metropolitan magistrate (CMM) Ajay Pandey had allowed the plea of the agency then.
Ullas and Raksha were arrested by the Economic Offences Wing (EoW) of the Delhi Police on 10th November last year from Ratnagiri in Maharashtra for allegedly duping around two lakh investors from seven states of nearly Rs500 crore by promising them high returns through their firm M/s Stock Guru India dealing in stock market.
The benefit will be available on interest income of FIIs and QFIs accruing between June 2013 and May 2015 irrespective of the date of investment
In a bid to attract greater FII (foreign institutional investor) participation in the debt market, the government today said foreign investors will pay only 5% withholding tax on interest earned from such investments till May 2015.
“In order to provide broad based incentive and encourage greater offshore investment in debt market by FIIs and qualified foreign investors (QFIs), it has been decided that the benefit of lower withholding tax (i.e. 5% instead of 20%) shall be available in respect of interest on investment made in bonds issued by Indian companies and Government securities,” the Finance Ministry said in a statement.
Notifying the decision, it said the reduction in rates and simplification of the withholding tax norms is expected to deepen the Indian debt market and accelerate the pace of growth of the Indian economy.
The benefit will be available on interest income of FIIs and QFIs accruing between June 2013 and May 2015 irrespective of the date of investment, the ministry added.
In 2013-14 Budget speech, finance minister P Chidambaram had announced that necessary changes are proposed to provide benefit of reduced withholding tax to cases where investment is made by a non-resident in rupee denominated long term infrastructure bonds.
In the 2011-12 Budget, the rate of withholding tax on interest payments on the borrowings of Infrastructure Debt Funds (IDF) was reduced from 20% to 5% with an aim to enhance resource availability for infrastructure development.
Subsequently, the tax was reduced from 20% to 5% in respect of interest paid on money borrowed in foreign currency from abroad for three year period during July 2012 to June 2015 on borrowings under a loan agreement and by way of infrastructure bonds issued in foreign currency.
The government has already simplified KYC norms for investments in long term infrastructure bonds by non-resident investors. They now do not need to produce PAN to avail the benefit of reduced withholding tax.