Retirement Planning for NRI is a dilemma! Where, When, How & What to do right now keeps you thinking. Most NRIs return home but many decide to embrace the new country as their home. As an NRI, are you completely satisfied with the way you have been planning for your retirement? What do you think? Let’s revise in details.
Main pieces in Retirement Planning for NRI puzzle are:
Where to Retire? India? If yes when? If Yes, are you ready investments wise?
When to Retire? The year, the age & which part of financial life?
Where are you Goals-Wise? Today & When you retire?
Are your Present Investments as pert your retirement needs?
Investment Options? With Low Taxes & BP!
Where to Retire?
Majority NRIs want to return to India, but many are forced to not come back or partially move to India. This may be due to various reasons like spouse/kids education career or your business linkages or personal choice.
This question has a major bearing on your overall retirement plan because, you need to be ready with a house, interiors, a vehicle, domestic help & other considerations. All these need money!
It is commonly seen that NRIs if belong to rural areas or towns prefer to stay at the nearest big city. This is because they need good facilities and also want to live near roots.
A person from interior Maharashtra may want to settle in Mumbai or Pune most likely. Hence we see good real estate opportunities in cities like Jaipur, Gurugram, Bengaluru, Hyderabad, Pune, Lucknow, etc.
An NRI needs to plan for housing & living until his life & spouse life expectancy.
Also choosing the country to retire helps in investing. The NRI can choose the currency in which he wants to invest in Rupees or in USD. It helps in saving currency costs.
The Right Time to Retire
Most of the NRIs have an age-specific retirement in case you’re in a job overseas.
While some think to retire early and move to India. So it is important to decide that when you will retire and what you will do post-retirement.
Some of the NRIs take up a job for a few more years and not necessarily until the retirement age. This allows them to earn more and also maintain NRI tax status.
Planning the date helps you to work towards a timeline and plan your investment to meet that timeline.
Future Goals
Goals related to children’s education and marriage, and maintaining the post-retirement lifestyle, planning holidays and some desires for the things you always wanted to need to be checked.
A Financial Plan helps in finding answers to these questions. It also defines priority & requirement for these goals.
Investment Options in India for NRIs
In India, there are many investment options for Retirement Planning for NRIs.
Investment depends on:
- Time to achieve Goal (Horizon)
- Risk Appetite/Tolerance
- Permissions & Taxability
An NRI can evaluate various investment alternatives from the list below. The need depends on the Retirement Plan, which is unique for everyone & family.
One can choose from:
Mutual funds: mutual funds are the pool of money collected from multiple investors and it is managed by the fund manager. NRIs from all countries (except US & Canada as there are some restrictions) can invest in mutual funds.
Direct Equity: an NRI can invest in equity directly through PIS or portfolio Investment Scheme.
Fixed deposits: To get tax free benefit, the NRIs can invest in NRE FD and FCNR account.
NPS: National Pension Scheme (NPS) is allowed to NRIs and they should use benefits. It also gives additional tax benefit to NRIs. Update 30 Oct 2019: Via a notification dated 30/10/2019, PFRDA allowed OCIs (Overseas Citizens of India) will also be allowed to invest in Tier 1 NPS Account. However, like NRIs Tier 2 is still not allowed.
Real estate: The NRIs can invest in real estate properties, but in residential and commercial properties but not in farms, plantation, and agriculture land.
PPF: If already opened before attaining NRI status.
Common Mistake to Avoid
- Never make an investment without a solid plan i.e. a Financial Plan.
- Start Early & build.
- BEWARE of Insurance Plans, ULIPs in name of retirement plans. (I see NRI Section on the portal of every Insurance Company in India. All you need is Term Plan, Health & liability protection. So beware of the traps.)
- The investment will work different in both countries in terms of taxation & currency, so the returns are going to differ.
- The inflation rate of the place where you will stay after retirement & Indian are different, so you have to plan as per the inflation movement in the country where you will stay after retirement.
- Inflation rates in India are to be significantly higher than in most other parts of the world.
- Planning for long term healthcare is also part of Retirement Planning & one must focus that too.
- Documenting Will, Power of Attorney, KYC, Co-Applicants, etc also need to be considered while making investments for Retirement Planning.
- Periodically reviewing your retirement plan is very important.
So, this was a brief regarding retirement planning for NRIs. As discussed, there is no general medicine. The treatment is specific for every individual or an NRI family.
Our Take: We feel, if you have 5 years in hand, Financial Planning is the best way to move ahead. If you have less than 5 Years- a plan may not be able to help in accumulation but can help in withdrawals & planning investments during post-retirement life. A Financial Plan helps you to:
- Review Current Assets
- Review/Fix Retirement Expense Requirement
- Plan for other Goals
- Plan for withdrawals when goals arrive.
- Invest as per Asset Allocation & Risk profile.
- Efficient Management of Wealth/Portfolio (Pre & Post Retirement)
Do let me know your queries, through the email or the comments section below. Also, if you are an NRI or were once, how are you tackling or tackled your retirement. Let’s all benefit from your experience.
