Top 5 reasons for investing in NPS in 2022

Saving for your retirement is one of the most important financial activities of your lifetime. While your income supports you today, your savings will help you tomorrow. This is why it is critical to save enough for your old age. Moreover, in addition to saving for your day-to-day needs, you also have to ensure that your savings are enough to counter inflation and can help you cover any financial emergencies. All of these concerns can be addressed with the National Pension Scheme (NPS).

Here are five reasons to invest in NPS in 2022:

1. Guaranteed savings: NPS can offer you assured savings at maturity, so you have a financial blanket to rely on in retirement. When the scheme matures at the age of 60, you can withdraw 60% of the funds in a lump sum. The remaining 40% can be invested in an annuity plan that pays you a regular income for life.
2. Flexible investment options: NPS has two options – auto and active choice. Under the former, you can enjoy a passive investment strategy where the scheme invests on your behalf. The latter offers you the option to select your preferred asset allocation. You can use either of these flexible options as per your investing experience and requirements and enjoy assured savings in retirement. Remember that your overall financial portfolio should be well-diversified. So, you can pick your investments within NPS depending on your other investments in mutual funds, real estate, stocks, bonds, gold, etc.
3. Low-risk: NPS is a government-backed pension plan. So, you can expect assured returns at relatively low risk and secure your future. Moreover, the scheme does not let you invest more than 75% of your fund in equities to balance out the risk. And, when you turn 50, the equity allocation is reduced by 2.5% each year to ensure capital preservation.
4. Tax benefits: NPS offers tax benefits under Section 80C of the Income Tax Act, 1961. You can claim a tax deduction of up to Rs. 1.5 lakh every year. Additionally, you can claim another tax deduction of up to Rs 50,000 under Section 80CCD (1B). Further, the 60% lump sum can be withdrawn tax-free at maturity.
5. Low-cost investment: NPS is a low-cost investment that can suit any investment budget. The minimum requirement for investment is as low as Rs. 1,000 per annum. This can be suitable for all income groups. Moreover, you can access and manage your investments online. So, the hassles involved are minimal, and the benefits far supersede them.

NPS can be an excellent investment to add to a well-diversified portfolio. If you have invested in mutual funds, stocks, bonds, etc., you can add NPS to your investment portfolio to further diversify and lower risk.

To sum it up

NPS is a much-preferred retirement tool that can offer financial security in retirement, and using it in combination with other investments like mutual funds, stocks, real estate, etc., can be helpful in ensuring a secure retirement.

You can download and browse through the Tata Capital Moneyfy App to check other similar options for your varied financial goals.