Will my Provident Fund Savings not be Sufficient?

Ask most individuals about how they are likely to manage their finances post-retirement and the first option they will mention is the provident fund.

The public provident fund (PPF) or the employee’s provident fund (EPF) is a useful avenue for building a retirement corpus; however it is unlikely to be enough for the individual let alone his family.

  • Why PF/PPF is not enough?

    Despite a high savings rate, statistics reveal that only about 10% of India’s working population has any form of social security like the employee’s provident fund. Self-employed individuals, professionals such as lawyers, doctors and accountants, employees in the unorganized sector rarely invest in social security avenues like the PPF and even when they do, it’s mainly for tax-saving as opposed to calculated retirement planning.

  • Not good enough for inflation

    Existing social security investments like the PPF or the EPF do not offer adequate returns once you consider inflation. Picture this – if long-term inflation is at 6% and the PPF rate is 8.5%, that’s a mere 2.5% (8.5%-6.0%) net of inflation.

  • Retirement plans are an alternative

    Retirement plans provide financial security so that when your income starts to ebb, you can still live with pride without compromising on your living standards. By providing you an avenue to accumulate and invest savings, the plan generates a lump sum on retirement, which is channelized to generate regular income through an annuity plan. Retirement plans also have an option to invest in equities thereby generating superior inflation-adjusted returns.


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