Can a senior citizen invest in PPF?


I had a PPF account that I closed after 15 years. I am now a senior citizen and want to open a new PPF account. Am I allowed to do so? If yes, do I have to furnish details about the old account in the application form even though it doesn’t ask for any such information?
Jayant R. Pai CFP and Head of Marketing, PPFAS Mutual FUND
replies: You can open a new account as there is no upper age limit for opening a PPF account. Also, given that you have officially closed your old account, there is no need to reveal its details. The only restriction is that an individual is permitted to open and operate only one PPF account at a time.

I am 50 and have taken early retirement. I have Rs 60 lakh invested in the stock market and I will be getting Rs 1.5 crore in retirement benefits. I want to know how I should invest this corpus to generate a monthly post-tax income of Rs 1.1 lakh. I live in my own house. Both my spouse and I have medical and term cover. I have property worth Rs 65 lakh to take care of my teenage daughter’s education and marriage expenses. I pay insurance premium of approximately Rs 1 lakh per annum.
Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics
replies: Since the Rs 2.1 crore corpus will be catering to your monthly expenses, capital preservation is primary. You require a post-tax monthly income of around Rs 1.1 lakh per month, which means a yearly sum of Rs 13.2 lakh. This translates to pre-tax returns of around 9%, which is hard to find in the low-risk product basket. Given that you are 50, you are ineligible for government schemes for pensioners.

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One of the best ways for you to manage your monthly income would be to invest your corpus in liquid funds or ultra-short duration funds from two different fund houses and opt for a systematic withdrawal plan (SWP). Such funds can earn around 7% pre-tax returns and the monthly amount can be fixed as per your need. Taking the SWP route will offer you three benefits: a) it will reduce your tax liability since the principal portion of withdrawal does not attract any tax; b) initially the capital gains will be taxed as per your tax slab and after three years, the same will be taxed at 20% with indexation; and c) if you set your monthly withdrawal lesser than interest earned, your capital will appreciate alongside.

I would recommend that you identify some expenses which can be curtailed to trim down your monthly expenditure at this stage so that your capital invested can grow to cater to inflation going forward.





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