When you think about the future – what do you envision? Most Millennials dream about a time when they can hang up their work boots and explore the world without worrying about their Out of Office messages. But securing the funds to enjoy your golden years takes prudent planning. Most young workers get their financial planning advice from finfluencers. Unfortunately, each person may have their own biases or agenda. To safeguard your finances in your golden years, you should consider the National Pension System (NPS).
What Is the NPS?
The Government of India started the NPS as a market-linked voluntary retirement scheme for all citizens. Individuals can invest in the NPS until retirement. They can then use the accumulated wealth to purchase an annuity of their choice from a life insurance company empaneled by the Pension Fund Regulatory and Development Authority (PFRDA).
Why Should I Invest in NPS?
What makes the NPS the sharpest tool in your retirement planning toolkit? Let’s find out!
1. Flexible Investments
The NPS requires a minimum annual investment of just INR 1,000 in your Tier I account. You can opt to get the amount auto-debited through a SIP. Or, you can make regular investments whenever possible to safeguard your future.
2. Tax Savings
The amount you invest in the NPS can get deducted from your taxable income under Section 80C of the Income Tax Act. . Section 80 CCD (1B) allows for an additional reduction of INR 50,000. When you subscribe to the NPS, you could enjoy tax savings of up to INR 2,00,000 each year!
3. Portfolio Control
Take charge of your finances and choose how your money gets invested into the various asset classes. Of course, since the NPS prioritizes security, they will automatically cap your exposure to equity at 75%. You can realign your portfolio based on market conditions without worrying about additional costs or taxes. If you aren’t ready to make investment decisions, don’t worry. Get started with the auto life cycle investment options that cap your equity exposure based on your age.
4. Light on the Pocket
The NPS is one of the most affordable investment instruments available in the market. The registration charge is just INR 400, while the fund management fee is less than 0.1% of the total fund amount.
The NPS is available across India, allowing easy portability regardless of where you go. You’ll receive a PRAN when you join NPS. Use your PRAN to instantly access your account online, invest as required, and check your fund balance.
6. Market-Linked Returns
The NPS spreads your risk across multiple asset classes and offers guaranteed returns. A monthly investment of just INR 1,000 could lead to at least 6.5% returns. Depending on your investment portfolio, you can expect returns of up to 21%.
Starting your retirement planning journey doesn’t need to be overwhelming. Small steps today can help you enjoy a financially secure tomorrow. Investing in the NPS today can ensure you retire happy tomorrow.