With millennials spending most of their time online, first-time investors especially from smaller towns and cities are drawn to financial influencers or finfluencers – anyone who gives information and advice on financial topics such as stock market trading, personal finance and mutual funds. Question is: How much can you trust the internet for making your financial decisions?
How to choose the right retirement tool?
Many experts believe millennials are growing more inclined towards early retirement post-pandemic making it imperative for them to start saving early for enjoying their life after they stop working. However, with the rise of finfluencers on the net, millennials are exposed to the dangers of making hasty decisions without consulting their financial advisors or professionals.
Planning for retirement can be an uphill task for many, especially, when they are unsure of whether to rely more on equities or debt to fund their old-age financial requirements. That apart, pension plans offered by various insurance companies in India may not always offer attractive annuity payouts.
On the other hand, low-cost retirement solutions like the National Pension System (NPS) offers a range of investment options and choice of pension fund schemes making retirement planning easy.
Invest with trusted brands for retirement planning
Just as doctors discourage patients from Googling before taking any medicine for their physical health, wealth experts advise caution before taking decisions based on financial advice on the internet for better financial health.
This Government-sponsored pension scheme rolled out by the Pension Fund Regulatory and Development Authority (PFRDA) is open to all. Any citizen of India between 18 to 70 years of age can apply for creating an NPS account. This means that irrespective of income level and status, you can contribute to this scheme all your working life in small installments, reaping the benefits post retirement.
Stock Holding is a one-stop destination catering to all your financial needs and a pioneer in creating financial literacy in India with safety and security of investments since 1986. It also offers advisory services to all NPS account holders .
Why should you invest in NPS
This scheme is like any other financial instrument that allows gradual investments through periodic investments and annuity payouts after 60 years of age. Here are some of the benefits of planning your retirement with NPS:
- Flexible: NPS subscribers have the flexibility to switch over from one investment option (equity, government securities and bonds ) to another or from 7 different fund managers. Account holders can also choose from Active or Auto mode for investing.
- Diversification: Since the NPS investments are divided across debt and equity, it allows you to earn market-linked returns along with stability.
- Simple: Opening an account with NPS provides a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime. The scheme is structured into two types of accounts:
- Tier-I account: This is the non-withdrawable permanent retirement account into which the regular contributions made by the subscriber are credited and invested as per the portfolio/fund manager chosen of the subscriber.
- Tier-II account: This is a voluntary withdrawable account which is allowed only when there is an active Tier I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when required.
- Portable: NPS provides hassle-free arrangement for individual subscribers while they shift to a new job or location, without leaving behind the corpus build, as happens in many pension schemes in India.
- Well Regulated: NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust.
- Low cost: You can contribute as low as Rs 1000 every financial year while the minimum contribution required at the time of account opening is Rs 500..
- Power of compounding: Investors can reap the benefits of compounding over the period of time given in pension wealth accumulation. The account maintenance charges being low, the benefit of accumulated pension wealth eventually becomes large.
- Easy to access: Transactions can be carried out online making it hassle-free. You can check the NAV, fund performance and contribution status anytime through the platform.
- Tax benefits: Investors can avail tax benefits of up to Rs 2 Lakh. The tax benefits can be availed under Section 80CCD(1), 80CCD(1B) and 80CCD(2).
Let us understand the Tax benefits in NPS for salaried individuals separately for 80c with the limit exhausted and not exhausted.
a) If you have
not exhausted your 80C limit yet , then you can invest up to 10% of your Salary (Basic + DA). This amount to the extent of 1.5 lakh is eligible for tax deduction u/s 80CCD (1) of IT Act, 1961.Additionally, you can invest up to Rs.50,000 and avail tax deduction u/s 80CCD (1B)
b) In case you have
exhausted your 80C limit then you can invest up to Rs.50,000 and avail tax deductions u/s 80CCD (1B) of Income Tax Act, 1961. This tax benefit is over& above the tax benefits claimed by you for your investments of up to Rs. 1.5 lakh under 80C
c) There is Additional Tax Benefit for Salaried individuals under Corporate NPS. In this scheme, employees get additional tax benefits on investment routed through their employer. Such investment up to 10% of Salary (Basic + Dearness Allowance) to the extent of Rs 7.5 lakh is deductible from taxable income u/s 80CCD (2) of Income Tax Act, 1961.
On retirement, individuals can receive a tax-free lump sum withdrawal of up to 60 percent of the total amount.
- Do I need NPS when I already have PF?
PF is a small component as pension under EPS is not sufficient to maintain retirement life. One can subscribe to NPS along with PF. There is also a provision that recognised provident fund can be transferred to NPS.
Anyone planning for retirement through NPS can choose between different pension fund schemes depending on their financial goals and risk appetite. This scheme is essentially a pension account, which means that you can avail of its benefits only after you have turned 60 years old. Post-retirement, you can take out a certain percentage of the corpus (not more than 60 per cent), while the remaining amount would be disbursed as a pension every month.
To know how much you must invest today to get your desired pension post-retirement, you can always use the NPS calculator available online. This will tell you the corpus you can accumulate pursuant to your regular contributions and vice versa. You may
Enroll for NPS scheme for Worry Free Retirement through StockHolding
and plan your retirement journey