This shows that delaying retirement planning can double or even triple your monthly burden. Starting at 25 gives you the longest runway and the smallest EMI-like investment.
Tax Benefits of NPS
NPS scheme comes with attractive tax advantages:
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Section 80C: Up to ₹1.5 lakh deduction annually
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Section 80CCD(1B): Additional ₹50,000 deduction exclusively for NPS
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Employer Contribution: Up to 10% of basic salary (14% for government employees) is tax-deductible under Section 80CCD(2)
This makes NPS one of the most tax-efficient investment avenues for retirement.
Things to Keep in Mind
1. Asset Allocation Matters
NPS scheme gives you the option to choose your asset allocation—equity, corporate bonds, and government securities. The returns you get depend on the mix you choose. Younger investors are advised to opt for higher equity allocation since they have more time to absorb market volatility.
2. Choose Your Fund Manager Wisely
Different fund managers offer different returns based on their strategies. You can switch fund managers and even asset allocations twice a year to optimise performance.
3. Review Your Investments Annually
Retirement planning isn’t a “set it and forget it” activity. Check your returns, asset mix, and contribution levels every year to stay on track.
4. Partial Withdrawals Are Allowed
NPS allows partial withdrawals (up to 25%) after completion of 3 financial years for specific purposes like education, marriage, or medical emergencies.
5. Choose Annuity Plans Carefully Post Retirement
When you retire, you’ll need to buy an annuity to receive your monthly pension. Different annuity providers offer varying rates and payout options. Compare plans to ensure you get the best post-retirement income.
How to Enroll in NPS
Opening an NPS account is simple and can be done online. You need:
Several leading banks, including ICICI Bank, offer seamless online account opening and management. You can track investments, make contributions, change asset allocations, and download account statements via the bank’s online portals.
Conclusion
A 25-year-old aiming for a ₹1 lakh monthly pension at retirement should ideally invest around ₹9,500 to ₹10,000 each month in NPS. This amount could vary slightly based on the actual rate of return and annuity yield. The key takeaway? Start early, stay consistent, and review regularly.
NPS is not just a national retirement scheme—it’s a disciplined investment habit with long-term rewards. By using tools like the NPS calculator and opting for trusted service providers, you can make smarter financial decisions that ensure comfort and stability in your golden years.
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