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Keep boosting your investments each year, or when income rises

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I work in the manufacturing sector with a take-home salary of 65,000 and my wife is working in the IT sector with a take-home salary of 60,000. I am repaying a home loan at an equated monthly instalment (EMI) of 44,000 for the next 12 years. My daughter is 1.5 years old. My primary goal is wealth creation to meet my goals such as a retirement corpus, and my child’s education and marriage. My existing systematic investment plans (SIPs) are about 26,000 a month, which I have started within a year. I plan to step up some of my SIPs by a minimum of 10%. Please advise if my investment plans are okay or need correction.

—Joshua

The investment rationale and the process you are following are in order. You are very right in starting monthly investments and are doing well when you say that you want to increase your monthly investments by 10% after a year of investment. This is important and should be followed religiously. The percentage of increase in savings may change, but increasing your investments every year, or as and when your income increases, is essential.

In addition, you must ensure that you review your portfolio every six months and take corrective measures if required, i.e. if a scheme underperforms, you may need to change it. Also, ensure that nominations for all your investments are in place.

Further, as both of you are working and are having a loan to repay, ensure that you are well protected by a term life insurance that covers both of you. This can be 7-8 times your annual income. Also, you should get health insurance for all your family members.

My employees’ pension scheme (EPS) account currently has 80,000. I am 50 now. At what age will I be eligible to get a pension? Will the amount I currently have in my EPS account keep earning yearly interest till I attain my retirement age even if I do not work with any employer ever in future?

—Shekhar Chatterjee

You are eligible to start getting a pension at the age of 58, provided you have completed 10 years of service. You can even start receiving a pension from the age of 50, but that will come at a reduced rate. Alternatively, you can defer pension to the age of 60 and can earn more.

EPS account does not earn any interest.

Surya Bhatia is managing partner of Asset Managers.

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