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Do You Think Your Provident Fund is Enough to Fund Your Retirement Goals?

  10/23/18 7:12 AM

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Ajay and Tina, a couple in their mid 30’s were having a conversation about planning for their retirement. Ajay generally had a casual attitude towards savings while Tina was more structured and believed in planning so saving eventually became an integral part of her life. Tina asked Ajay, “So, how do we go about? Should we look for some  investm ent plans online?”

Ajay replied, “Why do we need an investment plan specifically to fulfill our retirement goals. Don’t you think our Provident Fund would be sufficient to fulfill such goals? Provident funds aren’t bad, at least not when we get the cumulative sum in our hands on withdrawal. They are important for us so that we can have money when we need it the most. So why do we need to worry?”

That’s when there was a pause!

Tina then replied, “No. Ajay I highly doubt that it will be sufficient. However, let me speak to a financial expert at my workplace and then we can take a mutual call.”

The next day, Tina immediately rushed to meet Sandeep, who managed the finances at work and was also good in personal finance. This is what Sandeep explained to Tina;

“ Tina, we don’t just read about provident funds. Every month a good amount of our salary is going into a provident fund for the sake of secure future. Sometimes, even against our wishes. More than we hate

the term ‘provident fund’, we hate to face the question: will they be sufficient?

Well, let me answer this question now; while we are not worried about future due to many reasons, it is important to be responsible and start saving for the future. If you are looking forward to plan a retirement then you need to know when you wish to retire and what will be your needs then. Will you be taking care of yourself or will there be other people who will be taking care of you? You must know what will be your responsibility after your retirement. Will your spouse or children be financially independent?

All these questions are important. Just because we know some money is going to the provident fund for our retirement that doesn’t mean that we should be least bothered to think about the future.

Here lies the big mistake. Let’s do the math. Let’s say you earn Rs. 50,000 per month. Out of which Rs.6,000 per month (which is 72,000 a year) goes to your PF. Keeping in mind the rising prices of all necessities and other contingent expenses, will it be a sufficient amount as per your lifestyle? Along with a provident fund, we need retirement plans and obviously life and medical insurance are important because they not only protect you and your loved ones against accidental death, but also against illnesses which is rising due to stress and sedentary lifestyle.

Take some time out, think of the things you want to accomplish before and after your retirement. How much money will be required for the same? While your PF may provide some of it, opt for a complementing endowment plan for a more secure future. Endowment plans will provide you with guaranteed benefits, tax savings and also a life cover.”

Tina then thanked Sandeep for his guidance. The moment she returned home from work, she immediately started researching for the best endowment plans online and was firm in her decision that she needed to save in an endowment plans to achieve her retirement goals.

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