Sweta Gautam, Bangalore swetagautam@gmail.com

I have a five-year-old LIC policy that will give me around Rs 30-35 lakh when I retire after 12 years. A portion of this will be invested in annuity by LIC, giving me a steady income. I pay a premium of Rs 18,000 per month. Do I continue paying or withdraw it and invest in an SIP that promises higher returns?

The above information is not enough to guide for retirement planning. The following information is required:

• Current age
• Current monthly expenses
• Number of dependents
• Risk tolerance/appetite

A few things must be kept in mind before surrendering a policy.

Firstly, an annuity plan is taxable. Secondly, is the annuity enough to take care of the future expenses? Thirdly, how long have you been paying the premium? And, lastly, check whether you can withdraw the full amount.

It is always wise to divide all the eggs into different baskets, so it is advisable to start with an SIP. Investing in a mutual fund for the long term (more than 10 years) has given good returns. First, you need to calculate your expenses after 12 years and corpus for the same. An SIP with an investment of Rs 18,000 per month could yield a return of Rs 60 lakh approximately with a 12 to 13 per cent return, considering investing in a balanced large-cap fund. It is advisable to get in touch with a certified financial planner for proper guidance.

Hina Shah, Certified Financial PlannerCM, LUHEM Financial Planner, and Coach