Wednesday, September 30, 2015

Is my Health cover sufficient??

Typically while planning our goals we consider inflation in the range of 6-8%. But there are certain areas like education and medical it is much above it. 

With emergence of newer medical technology and innovation cost of medical treatment has increased many fold.

The biggest question which we all have in our mind is how much medical cover should I take to have minimum impact on me financial future.

There is no one size fit for all kind of formula for it, but yes depending on following points you may zero in on a particular amount :

1. Room, Boarding and Nursing Expenses : Most of the health policies permit you to spend 1% of the sum assured per day on room, boarding & nursing expenses or actuals whichever is less. Many a times all the other expenses from operation to investigations or treatment packages are also linked to it. 

So one way to decide on minimum sum assured requirement is to inquire in a good nearby hospital the per day room rates of the category you are comfortable with. Like if yu are comfortable with semi deluxe category on twin sharing basis whose charges are Rs.2500/day. Then in that case you must select minimum sum assured as Rs.300000.00.

2. Family history: Health insurance must cover the entire family. Some families have a history of diseases like diabetes and of heart. If the lifestyle in not changed or improved to control it may result in bigger complication, so they need to have additional cover. 

3. Your age: An early start helps. Premiums then are lower because you are unlikely to have pre-existing diseases. If you are 35 or below, you should start with a sum insured of Rs.2 - 3 lakh and increase it by 15% every year. Health insurance costs keep increasing sharply – much more than the average inflation figures released by the government. 

Normally medical insurance companies do not increase sum assured beyond age of 50 and in some cases even if they do then it is subject to prior medical test and certain exclusions.Secondly, if you are covered under floater policy and as both of you are moving in higher age bracket there are chances of getting both you and your spouse to have medical complications in the same year. So it is necessary to achieve a particular sum assured as you move closer to that age.

4. Dependents: If you have dependents, wife and kids, you will have to cover them as well. You need a family floater plan which is much cheaper as compared to individual medical plan.

5. Cover from Employer: The company you work for, may offer you an insurance cover. That's great but most often is not sufficient. Also, you could lose these benefits upon quitting the job, especially in a situation where the group cover is the primary health insurance option. You may also ask your employer or his insurer to convert that group policy to individual policy while quitting the job. In most of the cases we miss that. So its better safe then sorry and have an individual policy as well.

6. Top up cover: Considering the rising medical costs, especially with new and advanced procedures being available in India, choose a product which can be taken as a top-up policy (with some deductions applicable). Such a plan would give you continuity benefits over your existing policy at a very low premium. 

It is always advisable to consult your financial planner who can guide you much better in taking such crucial decisions.

Thursday, September 24, 2015

Which Investment strategy is correct in your age ?

Investing for retirement is important at any age, but the same strategy should not be used for every stage of your life. Those who are younger can tolerate more risk and/or can contribute small amounts, if that's all they can afford. Those who are older should take advantage of higher salaries and lower expenses to make the most of their peak years.

Starting Out: Your 20s

Even though you may have recently graduated from college and are likely to have started buying smart gadgets please also use this time to start investing. Whether it’s in a company EPF account or a PPF account you set up yourself, invest what you can as a twenty-something, even if you can contribute the 15% of your salary.

You have the biggest advantage over everyone in investing right now: time. Because of compound interest, what you invest during this decade has the greatest possible growth. Since you have more time to absorb changes in the market, you should also invest aggressively in Equity Mutual funds and avoid slow-growing assets like bonds.

Remember to stay away from unnecessary borrowing or over spending on your credit cards and personal loans.

Career-Focused: Your 30s

If you put off investing in your twenties due to enjoying earlier carrier year or paying off student loans or the fits and starts of establishing your career, age 30's is when you need to start putting money away. You’re still young enough to reap the rewards of compound interest, but old enough to be investing 20-25% of your income. Also read: 

Even if you’re now paying for a mortgage or starting a family, contributing to your retirement should be a top priority. You still have 30-40 active working years left, so this is when you need to maximize that contribution. Make sure to start an PPF account if your are not having an employee and having EPF account towards safer allocation.

Still you can invest majority of your investments for longer term needs like childs education, marriage or retirement in a diversified equity fund.

Retirement-Minded: Your 40s

If you’ve procrastinated saving for retirement until your forties, or if you were in a low-paying career and switched to something better, now is the time to buckle down and get serious. You’re at the midpoint of your career and you're probably reaching your peak earning potential. 

Even if you’re saving for your kids’ college funds or continuing to pay your mortgage, retirement savings should be the forefront of every financial decision. You have enough time to play catch up if you’re careful, but not enough time to mess around. Meet with a financial advisor if you’re not sure about which funds to choose. You’ll need to save in aggressive assets like equity mutual fund so your funds beat inflation. 

Do remember to start parking funds out of Child education, marriage goals to Bonds or FD's any need which is due in next 3-5 years should not go to equities at all.

Closing In: Your 50s and 60s

Since you’re getting closer to retirement age, now is not the time to lose focus. If you spent your younger years putting money in the latest hot stocks, you need to be more conservative the closer you get to actually needing your retirement savings.

Switching your investments to more stable, low-earning funds like bonds and money markets can be a good choice if you don’t want to risk having all your money on the table.

Now is also the time to take note of what you have and when might be a good time for you to actually retire. 

The Bottom Line

A Chinese proverb says: “The best time to plant a tree was 20 years ago. The second best time is now.” That attitude is at the heart of investing. No matter how old you are, the best time to start investing was 20 years ago. The second-best time is now. It’s never too late to do something, though. Just make sure the decisions you make are the right ones for your age group — your investment approach should age with you. 

It's also a good idea to meet with a qualified professional who can tell you where you stand and where you need to go. Professional help always pay in long run.

Thursday, September 17, 2015

Financial Planning Tips for people in 30s

From financial planning perspective it is a golden period for who are in their late 20s and 30s to plan and achieve what they dream of.

In 30s and 40s you should focus on building a base level financial security and moving along in terms of career. These are important financial planning years and you can benefit from solid financial planning advice.

By the time you reach 30s it's time to get down to business with your financial plan if you haven’t done so already.

The most basic financial step is to get spending under control. It is always best to live below one’s means. This allows for saving for retirement, car, kids education, a home and all of the other things you eventually want out of life.

Address excessive debt as soon as possible. This could be any outstanding education loan, personal loans or credit card debt—get what you can paid off and develop a payment plan for the rest.


Ideally, you should be thinking in terms of having a comprehensive financial plan done by a fee-only financial advisor. This is not about succumbing to an advisor out to sell expensive or unnecessary financial products, but rather about getting objective financial planning suggestions with as few conflicts of interest as possible.

You are moving forward in your career, buying home, starting business, getting married, having children and a whole bunch of other grown-up things. Financial success can involve juggling a lot of balls in the air. A qualified financial planner can help in providing a financial road map.


You should create a contingency fund which can take care of your expenses in case of a job loss or any medical emergency.


Life insurance is the most critical part of financial planning. Every individual who have dependents and loans to be paid, should need to have sufficient insurance coverage which can take care of family's future in case of premature death of earning member.

Together with sufficient life cover ensure you have taken Medical and Disability insurance if not provided by employer. The rising medical cost can disturb all your future goals and present lifestyle.


In present low interest and high inflationery period when real return post taxation is negative. It is always advisable to consider investing in equities in systematic way. In long term it can give you good real return. 


If you are employed automatically you have starts contributing to EPF. But in present high inflationary environment only EPF corpus will not be sufficient to take care of retire years.So, by the time you reach in mid 30s you are likely to be more established in careers, which means salting away money for retirement and other financial goals. This is a great time to do some retirement projections and planning.

A financial plan and retirement projections should be a must at this stage of life. Are you on track towards accumulating what you will need for retirement? Do you need to save more? In 40s there is still time to close any gaps. A detailed retirement savings and investment strategy should be key outgrowths of the financial planning process discussed above.


In 30s you need to focus on financial planning. Retirement is still a bit far off, but not as far off as it used to be. Retirement savings should be a priority. For those who are married and have kids, protecting their loved ones in the case of death or disability should also be a priority. 

Friday, September 11, 2015

TDS of 10% applies to certain types of PF withdrawals effective 1 June

However, this will happen only if your accumulated PF balance is Rs.30,000/- or more and you withdraw it before five continuous years of service

While provident fund (PF) is an instrument meant to help a person save for the long term, it provides for premature partial or full withdrawal as well. One relevant rule regarding this is that if an individual withdraws money after at least five continuous years of employment and contribution to the PF account, the withdrawn amount is not taxed.

However, if the withdrawal is made before five continuous years, tax is deducted at source (TDS). Let’s see how this works.


The amount that you withdraw is taxed either at the marginal rate or at the rate at which you pay income tax. From 1 June, if you withdraw from your PF amount, TDS will be deducted. However, this will happen only if your accumulated PF balance is Rs.30,000 or more and you withdraw it before five continuous years of service. Those who don’t fall under the taxable income can avoid TDS by submitting forms 15G or 15H.


These are self-declaration forms in which you can state that your total income is below the taxable limit and, therefore, you are not liable for TDS.

Form 15G is for individuals below 60 years of age having no taxable income, while form 15H is for senior citizens who are 60 years and above. You have to quote your Permanent Account Number (PAN). These forms are accepted in duplicate.

However, there are a few limitations. Forms 15G and 15H are not applicable if the amount of withdrawal is more than Rs.2.5 lakh and Rs.3 lakh, respectively for form 15G and 15H. 

If you don’t submit the applicable form, and only submit your PAN, then tax will be deducted at source at 10% if your PF withdrawal amount is Rs.30,000 or more with service of less than five years. In case you fail to submit PAN, TDS will be deducted at maximum marginal rate of 34.608%.

Under section 192A of the Income-tax Act, 1961, TDS is deductible at the time of payment. Submitting form 15G or 15H is a convenient approach for those who don’t have a taxable income as they would have to claim a refund later.


If you withdraw from the PF account after five years of continuous service, the amount is tax-free. In such as scenario, TDS is not deducted and you are not required to submit PAN or form 15G or 15H. In case of unforeseen circumstances such as loss of job due to ill health or discontinuation of business by employer, you get an exemption from paying any kind of tax on the PF withdrawal amount. In such cases, no TDS will be deducted either.

If you transfer your PF account from one employer to another, or if the PF amount is less than Rs.30,000 but you have not completed five years, you don’t have to pay TDS.

**Source - Mint