If you want to secure your retirement financially, you must start investing or saving your money in instruments that can offer inflation-beating returns. For this purpose, you can consider a SIP (Systematic Investment Plan) in mutual funds online, invest in stocks or bonds, or choose one of the government-backed schemes like the National Pension Scheme, among many other things. All of these investments and several others can offer you peace of mind and financial security. But if your requirement is to mainly have a monthly pension in retirement, the NPS may be the right option for you. Keep reading to find out more.
What is NPS?
The NPS is a government-backed long-term savings scheme that you can use to plan your retirement. This is a voluntary scheme for the public, private, and unorganized sectors. However, it cannot be used by the armed forces.
You can select different types of fund options within the NPS, such as debt and equity. However, your total equity allocation cannot be more than 75% of the investment amount. The remaining of it has to be in debt. This makes NPS a low-risk option that can offer financial security for the later years of your life.
Does NPS give a monthly pension?
Yes, NPS offers a monthly pension after retirement for as long as you live. You can withdraw your NPS funds post-retirement after the age of 60 years. However, you can only withdraw 60% of the fund’s value in a lump sum. This amount is exempt from all taxes. The remaining amount is used to purchase an annuity plan from a life insurance company of your choice. This money will be given to you as a monthly pension for the rest of your life.
For instance, if the value of your NPS fund is Rs. 1 crore at the age of 60, you will be able to withdraw Rs. 60 lakhs in a lump sum. The remaining Rs. 40 lakhs will be used to buy an annuity and paid to you over the years as regular monthly income.
What other options can you invest in to secure your retirement?
The NPS can offer good returns and also provide low risk. However, in order to have a secure retirement, it is crucial to have a well-diversified portfolio that includes stocks, bonds, exchange-traded funds, mutual funds, index funds, and more. If you prefer to stick to low-risk options, you can also consider investing in debt mutual funds online as they carry relatively low risk. However, if you have a high-risk appetite, investing in equity mutual funds online may be a better option.
To sum it up
Financial security in retirement is essential, and NPS can help you build considerable wealth over time. Moreover, starting early can offer you an added advantage. Apart from this, you can also invest in mutual funds through a SIP. Irrespective of what you choose, the Tata Capital Moneyfy app can help you invest with ease and avoid unnecessary hassles.