I lost my job six years ago and I invested my EPF and other savings worth Rs 30 lakh in mutual funds schemes with monthly dividend payout option. Now I am not getting regular dividends and my investment value has fallen by 30%. How do I ensure regular income in this situation?
Ankur Choudhary, Co-Founder and CIO, Goalwise says, “Mutual fund dividends are not fixed in amount or frequency. It is at the discretion of the fund manager. Also the dividends are just your own money being returned to you. If you get a dividend of Rs 10,000 then the value of your investments also goes down by Rs 10,000. In that sense, they are similar to redemptions except in terms of taxation. So, the best way to get regular ‘income’ is to actually redeem that money every month. This can be done by either setting up a systematic withdrawal plan (SWP) of the desired amount in the funds that you have invested in or by doing it manually every month as per your needs. You may want to prefer the latter option and redeem money only in the month in which you don’t get a dividend by a certain date.”
I stopped working in January 2018, at the age of 61. The PF remains in the EPF account. The last contribution by my erstwhile employer was in February 2018. Annual interest has been duly paid in 2018 and 2019. Now it is time for the 2019-20 interest to be paid. How long will the money—around Rs 50 lakh— earn interest? Should I withdraw the full amount now, as soon as the interest is credited, if no further interest is going to be paid on it? How should I invest that amount?
Jayant R. Pai, CFP and Head – Products, PPFAS Mutual Fund says, “Any EPF account where no contributions have been made for a period of 36 months, will be regarded as ‘dormant’ and will cease to earn interest (especially in the case of those above the age of 58). In your case, this will happen after February 2021. Also, the tax shelter available on EPF interest is withdrawn from the time an employee retires. Hence, the interest earned by you, post retirement, has already become relatively less attractive. However, given that it is still higher than options of comparable safety, you can continue with the EPF account till you receive your interest for 2020-21.”
