Retirement Fund Choices

I told my client that her PF (8.25%) can beat her equity (16%). She thought it’s not possible—until she saw the math. Yes, your PF which generates 8.25% returns, can beat an investment that gives 16%, say equity. I know it’s difficult to digest, but let me decode it for you. Every month, you contribute 12% of your basic salary towards PF. • Your employer matches that with another 12% • The best part: your employer’s contribution is not taxable in your hands, even under the new tax regime. That’s a direct tax saving most people ignore. Let’s put numbers: • Suppose your basic salary = ₹1 lakh • Your PF contribution = ₹12,000 • Employer adds = ₹12,000 (tax-free for you) • Total PF inflow = ₹24,000 per month Now compare with equity: • Your friend has not opted for EPF and instead invests in equity • Effectively, he can only invest ~₹20,256 (after tax) instead of ₹24,000 After 5 years: • PF corpus = ₹17.75 lakh • Equity corpus (11% CAGR, post-tax) = ₹15.75 lakh Even though equity gave higher “returns”, PF still beat it — purely because of the tax edge. PF also enjoys the rare EEE status: ✅ Exempt on contribution (employer contribution in both regimes, employee contribution in old regime) ✅ Exempt on growth (interest is tax-free) ✅ Exempt on withdrawal (after 5 years of service) For equity to actually beat PF, it needs to deliver: • 16% CAGR over 5 years (to reach ₹17.75 lakh in 5 years with ₹20,256 per month, you need 16% CAGR) • 12.3% CAGR over 10 years • 11% CAGR over 15 years • 10.35% CAGR over 20 years So, especially if you’re in the later stages of your career, don’t ignore PF. It’s a stable, no-risk compounding machine that silently builds wealth while saving you tax. 👉 I’m not saying ignore equity. In the long term, equity can beat PF. But PF is the best debt investment you can ever make. 📩 I covered this in more detail in last week’s newsletter with examples. If you liked this post, you’ll enjoy future editions too — subscribe via the link in the comments. 🔁 And if you found this useful, hit Reshare so more people can understand this maths.

Armed forces pensioners can lose ₹50,000 - ₹75,000 every month from 1 April 2026. This matters deeply to the Forces community (And yes, we all are affected) Till now, if an officer or soldier had a disability, their entire pension was tax-free - both the service part and the disability part. From 1 April 2026, this changes. Only those invalided out due to injury or war will continue to receive 100% tax-free pension. If you had a disability but took PMR or superannuated, both components of the pension become taxable. Let me show this with real numbers. Example: Superannuated Officer with Disability • Last drawn pay: ₹2,31,400 (2,15,900+15,500) • Basic pension (50%): ₹1,15,700 • Disability element (30% of Pension): ₹34,710 ~ Monthly pension (without DA): ₹1,50,410 ~ With 58% DA: ₹2,37,648 per month ~ Annual pension: ₹28,51,774 (Currently 100% tax-free) Post April 2026 (if taxed at 30% + cess): > Annual tax ≈ ₹8.9 lakh > Monthly tax impact ≈ ₹74,000 This is not a small adjustment; it materially changes monthly cash flow. Important notes: • Rule appears applicable to PMR / superannuated officers post 01 Apr 26 (clarity awaited). • Those medically invalided out remain fully tax-exempt. • Final impact depends on the Gazette notification and possible reliefs. This is not panic, but it does require awareness. If you’ve calculated how this affects you, share your view. If you want help understanding your numbers, feel free to connect. 𝗙𝗿𝗲𝗲 𝗪𝗲𝗯𝗶𝗻𝗮𝗿: 𝗠𝗮𝘀𝘁𝗲𝗿𝗰𝗹𝗮𝘀𝘀 𝗼𝗻 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 22 February 𝟮𝟬𝟮𝟲 (𝗦𝗨𝗡𝗗𝗔𝗬) | 11:00 AM 𝗟𝗶𝗻𝗸𝘀 𝗶𝗻 𝗰𝗼𝗺𝗺𝗲𝗻𝘁𝘀 Let's connect - Col Sandeep! #pension #government

You’re Not Diversified Just Because You Own Five Funds A lot of investors feel comfortable when their portfolios are packed with alternatives. They’ve got private equity. Maybe some real estate. A bit of private credit. A little venture. Seems like a good mix. But peel back the layers and a different story emerges. Private equity—especially buyout—dominates most alternative allocations. In many cases, it makes up 60–70% of the total alt sleeve. Not just in volume, but in influence. And here’s the issue: many of the “different” strategies investors use to diversify from buyout… behave a lot like buyout. Distressed debt? Often tracks closely with PE, especially in recoveries. Value-add real estate? Similar risk-return shape, especially when leverage is involved. Late-stage venture? More correlated than you think once the exits line up. This isn’t just a theory. The data backs it. Figure 2.2 shows buyout’s correlation to other major alt strategies. Most are moderately to strongly linked. You might think you’re adding diversification—but what you’re really adding is overlap. In other words, a lot of so-called diversification is just more buyout risk in disguise. So what can you do? Start by asking harder questions: What drives this fund’s return? Is it different from my other holdings? Does this strategy react differently in a drawdown? Am I adding exposure to the same sectors, geographies, or companies I already own? You wouldn’t build a public portfolio that’s 80% tech and call it diversified. But that’s effectively what some alt portfolios are doing—just in a less transparent way. True diversification isn’t about strategy labels. It’s about behavioral divergence. If everything in your alternatives book responds to the same economic conditions, you don’t have a diversified portfolio. You have a concentrated one—with layers. For more see our Nomura CIO Corner: https://lnkd.in/e4TCax_g #PrivateEquity #Diversification #PortfolioOverlap #AlternativeAssets #CIOInsights

“I’ll have to work until I’m 60.” She said it with a sigh. Just a few years ago, her goal was to retire at 55. What changed? At age 42, she welcomed her son. Life’s greatest joy had also reshaped her financial future. During our meeting, she shared her concern:- “I have to say, it’s not encouraging at all. I wanted to retire at 55, but looking at my situation now, I think I’ll need to extend it to 60.” Her words carried both hope and worried. Like countless others, her priorities shifted as life unfolded in beautiful, unexpected ways. This wasn’t a failure of planning. It was a successful adaptation to life. Her plan needed to evolve, just as her life had. Having a child later brought immense joy, but also new financial layers:- childcare, education, and her own retirement. All unfolding within a tighter timeline. We identified three core challenges:- 📌 Shortened Savings Window – Only 13 years until her original retirement age, with savings not yet where they needed to be. 📌 Increased Financial Commitments – Funds once aimed at retirement were now lovingly redirected to her son. 📌 Extended Dependency Period – At 55, her son would only be 13. Her retirement would need to support them both. Retirement planning isn’t about sticking rigidly to one path. It’s about adapting to life’s changes with clarity and courage. Together, we built a new map forward: ↳The Power of Five More Years Extending her retirement target to 60 became her most powerful lever. As adding years of savings and compounding, while shortening the portfolio's required lifespan. ↳ Intentional Spending vs. Mindful Cutting We audited her cash flow not just to cut back, but to redirect. Every ringgit moved was a conscious choice funding either her son's future or her own. ↳Turbocharging Retirement Savings We maximized her EPF voluntary contributions and aligned her investment strategy to make the next 13 years work harder than the past 20 could have. ↳ Building a Separate “Future Fund” A dedicated education fund for her son was created. This critical step protects her retirement nest egg from becoming a college fund later. Life doesn’t always go as planned, and that’s okay. What matters is recognizing where you are and taking intentional steps forward. Her story isn't unique, but her response is commendable. She chose adaptation over anxiety, and action over avoidance. What about you? When was the last time your financial plan had a heart-to-heart with your life? If it's been a while or if life has thrown you a beautiful curveball, let that be your prompt. Revisit your plan. Adjust the timeline. Redefine the goals. Because the best retirement plan isn't the one written in stone. It's the one that grows and changes with you.

𝐒𝐢𝐦𝐩𝐥𝐞 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬, 𝐂𝐨𝐦𝐩𝐥𝐞𝐱 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬: The Case for ... Doing Nothing? 🏖️ Most endowments and pension funds in the US follow a model similar to the aforementioned Yale Model: Large investment teams consisting of veteran investors, making active bets on managers, geographies and industries with the goal of outperforming the market over the long-term. Interestingly, that idea is being upstaged by one of their own. Steve Edmundson, CIO of the Nevada Public Employees’ Retirement System (NPERS), 𝐜𝐡𝐨𝐨𝐬𝐞𝐬 𝐭𝐨 (𝐦𝐨𝐬𝐭𝐥𝐲) 𝐝𝐨 𝐧𝐨𝐭𝐡𝐢𝐧𝐠 𝐚𝐭 𝐚𝐥𝐥. NPERS, to the most part, goes against the ideas of the Yale Model and its search for complexity. 𝐈𝐭𝐬 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐨𝐟 𝐫𝐨𝐮𝐠𝐡𝐥𝐲 66 𝐛𝐢𝐥𝐥𝐢𝐨𝐧 𝐝𝐨𝐥𝐥𝐚𝐫𝐬 (𝐚𝐬 𝐨𝐟 𝐌𝐚𝐫𝐜𝐡 2025) 𝐢𝐬 𝐭𝐨 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐩𝐚𝐫𝐭 𝐢𝐧𝐯𝐞𝐬𝐭𝐞𝐝 𝐢𝐧 𝐩𝐚𝐬𝐬𝐢𝐯𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬:For US stocks (35%), they are invested in the S&P. For international stocks (14%), they are invested in MSCI World ex-US. For US bonds (28%), they hold US treasuries. The only exceptions are Private Real Estate and Private Equity (12% target allocation), which they have outsourced to external managers. 𝐀𝐧𝐝 𝐭𝐡𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬 𝐬𝐩𝐞𝐚𝐤 𝐟𝐨𝐫 𝐭𝐡𝐞𝐦𝐬𝐞𝐥𝐯𝐞𝐬: Since inception, NPERS has outperformed the market return by 0,3% p.a. Compare that to CalPERS, the largest public pension fund in the US, which employs a large investment team and makes active investments in liquid and illiquid assets - yet notoriously lags its benchmark over a 20-year period and just barely outperformed over 10- and 30-year periods. It’s interesting to see that large institutional investors suffer from the same level of “ego” that I personally see in affluent investors (and admittedly, sometimes myself): We have a top-notch team, we are smarter than other investors - we can generate alpha, we can outperform the market. But can they, really? Often, the numbers tell a different story. But to me, there's an even more important learning. Many of our affluent clients think that they need to invest differently from the average retail investor simply because they have more investable capital (and maybe my many newsletter about PE and other alts don't help). After all, that level of investable capital is needed to access some asset classes in the first place, such as private equity or hedge funds, and the recent push by GPs into fundraising from affluent individuals doesn’t help either. But it’s especially in such a moment where I like to highlight the story of NPERS: It’s a massive pool of capital, run by a tiny investing team, that actively chose not to make active choices - and that is succeeding with that strategy.

Europe’s pension funds are playing it too safe.. and it’s costing us all. While US and Canadian pension giants are generating 8–11% annual returns, most continental European funds (excluding the Nordics) are stuck in the 4–6% range. Why? Because they’re avoiding the one asset class that’s consistently outperformed: private markets. Compare the numbers: 🇺🇸 US: 15.2% from private equity; 14–20% in private markets 🇨🇦 Canada: 10.9% returns (CPP); 45% in private markets 🇪🇺 Europe: 4–6% returns; 60–70% in bonds, <5% in private equity, almost no venture The takeaway is clear: Illiquidity isn’t the enemy - it’s the unlock. Private equity, infrastructure, and venture capital offer long-term value creation and compounding that bonds and public markets alone simply can’t match. Europe’s pension capital is massively underused. Imagine what reallocating just 5–10% into venture and private markets could do:  - Better pensions  - More innovation funding  - Stronger economic resilience It’s time we bring long-term capital back to long-term investing. #PrivateMarkets #VentureCapital #PensionReform #AssetAllocation #Europe #LongTermCapital

"My CPA told me: You don't have to spend your HSA — just let it grow." Last week, I reviewed a client's tax return. They contributed $8,300 to their HSA... and panicked thinking they had to spend it all. They'd been saving receipts all year, planning a December shopping spree for eligible expenses. I stopped them cold: "That's FSA thinking. Your HSA never expires." That money? Still sitting there, tax-free, compounding. Completely untaxed growth — potentially for decades. Their face when they realized their HSA could become a stealth retirement account was priceless. The HSA is the ONLY triple-tax-free account in existence: - Tax-deductible going in (immediate savings) - Grows tax-free (no capital gains taxes ever) - Withdraw tax-free for qualified medical expenses — even decades later And if you don't use it for medical expenses? At age 65, it works like a traditional IRA — withdraw for anything, just pay income tax (no penalties). Here's how to actually win with an HSA: - Max out the contribution every year ($8,300 family limit for 2024, rising to $8,550 in 2025) - Do NOT spend it. Pay medical costs out-of-pocket if you can  - Invest the HSA balance — don't leave it in cash earning nothing - Keep every medical receipt digitally. You can reimburse yourself years later, tax-free - Treat your HSA as part of your retirement portfolio — not a short-term medical fund Remember: The average couple needs $315,000 for healthcare in retirement. Your future self will thank you for this tax-free medical nest egg. If your CPA hasn't explained this strategy to you, you're leaving one of the most powerful tax advantages on the table.

What if a tiny 0.2 % fee could add ₹2 lakh to your retirement corpus? → Expense ratio measures the annual cost of managing a mutual fund expressed as a percentage of assets. In India the average equity mutual fund expense ratio is about 1.5 %. A fund with a 1 % expense ratio charges Rs 10,000 per year on a Rs 10 lakh investment. → Lower expense ratios are linked to higher long‑term returns because fees compound over time. Data from the AMFI shows that funds in the lowest expense‑ratio quartile outperformed the highest quartile by roughly 1.2 percentage points annually over ten years. Passive index funds typically have expense ratios below 0.2 %. → Even a 0.5 % reduction in expense ratio can increase the final corpus by about Rs 2 lakh after twenty years on a Rs 10 lakh SIP. Investors should compare expense ratios alongside performance when selecting a fund.

Your 401(k) provider hopes you never find this number (It could be costing you tens of thousands). It's called your expense ratio. And according to research from Vanguard, it could be quietly eating away at your retirement. Here's a real-world example: A business owner asked me to review their company's 401(k) plan. $500K in assets. Employees contributing every paycheck. Everything looked fine on the surface. Then we examined the fund expenses: Their target-date funds? 1.1% annual fees. The S&P 500 fund? 0.8%. Even their "stable value" fund was charging 0.72%. Compare that to available alternatives: 👉 Target-date funds at 0.08% 👉 S&P 500 index at 0.03% 👉 Stable value at 0.25% The impact? Vanguard's analysis shows that over 30 years, a $100,000 investment with 0.10% fees grows to $557,383, while the same investment with 2.00% fees reaches only $317,081—a difference of $240,302.* Here's how to check your fees: 1. Log into your 401(k) account 2. Find "Investment Options" or "Fund Information" 3. Look for "Expense Ratio" or "Annual Operating Expenses" 4. Compare your options carefully 5. Consider speaking with your plan administrator The good news? Fee compression is real. According to the Investment Company Institute, average equity fund expense ratios have dropped 60% since 1996. But you still need to be vigilant. It's worth taking the time to check because lower fees can support higher returns. What's your take on 401(k) fees? Have you checked yours lately? Follow me for more insights on maximizing your retirement savings. * Source: Vanguard's Principles for Investing Success #401k #retirementplanning #FinancialAdvisor #fees #investing

The WSJ's editorial this morning was very positive on private market assets in 401k's. What's actually happening with retirement plans, and what are the risks/trade-offs to know? Last August, the President signed an executive order pushing government agencies to "democratize" alternatives. That opened the door for private assets like private equity, private credit, real estate, and crypto in 401k retirement plans. Last week, the Department of Labor published proposed regulation that brings this one step closer to reality. Why does this matter? 1️⃣ Alternatives have historically earned higher returns. Over the past 20 years, private equity has annualized ~14% vs. ~10% for public equities. 2️⃣ Low correlation to stocks & bonds can reduce portfolio volatility over time. Real estate, for example, has been used in retirement plans for decades to smoothen returns. 3️⃣ Access to more opportunities. Public markets are getting more concentrated and expensive — there are fewer public companies today than in the 1990s, and some of the most exciting companies may stay private for a long time (or forever). But there are real trade-offs: ⚠️ Alternatives are illiquid. You can't sell a portfolio of properties in a matter of days. It takes careful planning to maximize returns. ⚠️ Private assets are complex. They require specialized diligence and research. There is a big gap between the top performing managers and the bottom-performing managers. ⚠️ Some alternatives, like gold or crypto, can be highly volatile and probably shouldn't make up a large share of your portfolio. In many ways, retirement plans might actually be the ideal home for alternatives. For long term illiquid assets, the investment timeline matches well. People naturally avoid dipping into their 401k's until retirement because of the withdrawal penalty. Most public and private pension plans use alternatives today. So how do you manage the trade-offs for everyday investors? ✅ Target Date Funds (or "Glide Path" strategies) — these shift the burden of planning and research onto the asset manager, so individuals can "set it and forget it." You decide when you plan to retire and what your risk tolerance is, and the fund invests in a mix of stocks, bonds, and alternatives targeting your goals. ✅ Modest allocations to alternatives: enough to move the needle on better returns and lower volatility, but not so much that illiquidity becomes a challenge. ✅ Investor education. Incredibly, there are still savers who are not availing of 401k matches and maximizing their contributions. The opportunity set is getting larger, so we have a lot to do to make sure investors know what tools they have and how to use them. Lots happening in this space — I plan to put out a video and more content as things evolve! 🎬 👇 Follow the Guide to Alternatives for more on private markets, alternatives, and retirement investing. #alternatives #markets #401k #retirement #privatemarkets #investing