PPF – can you start at any age?

As many of you know by now, PPF is one of the favorite financial instruments that I encourage others to go for. There is also a lot of curiosity about the product, as is evidenced by the views, comments and questions on the posts that I have written about PPF. Many people have asked me if there is a correct age to invest in PPF or is there an age after which we should not look at PPF as an investment. Let me try to address these issues in this post.

In order to gain the maximum possible advantage out of compounding, one should be invested in PPF for as long as possible. Therefore, any investor who is just starting his/her work life should open an account and try to maximize the contribution every year. The term of the PPF account need not be seen as 15 years, you can continue it in blocks of 5 years for as long as you want. You can withdraw from it only if you need the money for a goal that has come up and for which you do not want to redeem your equity portfolio. The best situation for your PPF will be if it is able to grow uninterrupted, you can create serious wealth if you can do so. Remember PPF is important even if you have PF as you can withdraw from your PPF in a far easier manner than you can from your PF. In case you are not having a PF account then consider opening a PPF account for your spouse too.

What happens if you are in the age group of 30 – 40 and have not got a PPF account so far? Well, you should still go ahead and open one. Your children will probably need money for college when you are between 47 – 53 and the PPF account completing around that time will serve as a nice hedge. I know many of you are saying – “but I am doing SIP for some years now and that will take care of it”. Maybe it will, but it is quite possible to have a string of poor years in the markets just when you need the money. Having a PPF account with all the cash sitting there is a perfect antidote. And, if it so happens, in case you do not need to withdraw again just let it grow.

What about people older than 40? Well, I think they should also have a PPF account. You can time it such that the 15 or 20 years are up when you are just retiring. In the first decade of your retirement use the PPF and PF money to take care of your expenses. This will help your MF and stocks portfolio to grow and hopefully there will be enough for long term care too, should you need it.

If you are beyond 50, you can still have use of PPF account for tax saving purposes and to use the tax free withdrawal feature. This can be a very useful way of ensuring that you do not pay much taxes on the income that you will need for taking care of your regular annual expenses. Finally for even older people you can operate a PPF account for your grand children. They will get a pretty handy sum to start off in life when the pass out of college.

So there you are – the stodgy debt product that does not seem worth investing in can be used in so many different ways. If you still do not have a PPF account, I hope this post has now encouraged you enough to make opening it as one of your 2016 resolutions.

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5 thoughts on “PPF – can you start at any age?

    • Well, the point is you need debt for many reasons. Providing a solid foundation to your portfolio is one and serving as a hedge in poor years of equity is another. It may not be glamorous but it is really very effective in every possible way.

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