Retirement is a time when you stop earning actively and depend on the funds which you accumulated over your life to help you tide over your expenses. While your income stops after retirement, your expenses don’t and so you need to invest in retirement plans when you are earning so that you can accumulate a retirement corpus.
When it comes to retirement plans, there are various options in the market. You can invest in mutual fund schemes, opt for life insurance pension plans, choose long term fixed deposits, etc. Among the available options, the National Pension System (NPS) is one such scheme which is retirement oriented and helps you build up a retirement corpus.
The NPS investment plan was introduced by the Government in 2009 for the common public and since then it has become a popular retirement planning avenue for many. Here are the top five reasons which make the NPS investment plan a must buy a retirement plan –
Market linked investments
The NPS investment plan is a market-linked investment plan. The amount that you deposit towards the NPS scheme is invested in the available funds which, in turn, invest in the instruments of the financial market. There is one equity fund (Asset Class E) and two debt funds (Asset C and G). These market-linked funds give attractive returns in sync with the growth of the market. As such, the returns which you can earn from the NPS scheme are inflation-adjusted and attractive.
Suitable for every investor
To invest in the NPS scheme you don’t have to be a seasoned investor. The scheme offers two types of investment strategies – Active Choice and Auto Choice. If you know how to invest you can choose the Active Choice strategy and invest in the available funds. However, if you don’t know how to handle your investments, you can choose the Auto Choice strategy. Under this strategy, you would just have to choose your risk appetite and then the investment would be done in an automated manner. These strategies make NPS suitable for every type of investor.
Choice of the NPS fund manager
PFRDA (Pension Fund Regulatory and Development Authority) has allowed eight entities to act as the NPS fund manager. The choice of the NPS fund manager rests is the hands of the investor. When investing in to the NPS scheme, you can choose the fund manager based on its past returns. Moreover, you can also switch between the available NPS fund managers during the investment tenure if you want for earning better returns.
Disciplined investments
Once you open a NPS account, you have to invest in the scheme every year, in a regular manner, to keep your account active. This investment continues till you reach 60 years of age. NPS is, therefore, a long term saving scheme which promotes regular savings and builds up a disciplined investment habit. Moreover, when you invest in a disciplined manner, you can also create a considerable retirement corpus which, with market-linked returns, becomes substantial by the time you retire thus helping you to be financially independent even post-retirement.
Tax benefits
NPS investments are quite tax saving in nature as they give you different types of tax benefits on investments as well as on returns. Investments into the NPS scheme are allowed as a tax-free deduction from your taxable income. You can claim a deduction of up to Rs.1.5 lakhs under Section 80CCD (1) and an additional deduction of up to Rs.50, 000 under Section 80CCD (1B). Partial withdrawals done from the scheme are also considered to be tax-free incomes. Lastly, when the scheme matures, you can avail 60% of the corpus as a tax-free income in a lump sum. Thus, these tax benefits make the NPS scheme the best retirement planning tool which not only creates a substantial corpus but also helps you with tax planning.
These reasons are the top reasons why NPS is the most suitable retirement plan to buy. To buy this plan you can choose ETMONEY.COM. ETMONEY.COM is an online personal finance platform for your insurance and investment needs. You can also avail loans through the website. For NPS investments, ETMONEY.COM allows you the ease of investing online wherein you can upload your KYC documents and make the investment online in an instant. So, plan your retirement through NPS and choose ETMONEY.COM to invest in the NPS scheme in the easiest possible way.