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Nowadays, the population structure in India is changing rapidly. Where the age of people is increasing, and families are also getting smaller. So now people are preparing for retirement in their youth itself, so that they do not have to face any problem regarding money later. On the other hand, some people still keep postponing retirement planning. They either save money in old ways or think that the family will take care of them in old age, but such thinking only puts them in trouble later.

Actually, in this era of increasing medical expenses, rising inflation, and nuclear families, strong retirement planning is very important for everyone. In such a situation, the National Pension System (NPS) is considered a strong option for everyone.

What is NPS?

Actually, in today's era, the National Pension System (NPS) is the best scheme. It helps you to save in a disciplined manner during your job. The purpose of this scheme is that when you retire, you have a large fund (capital) and you keep getting a pension every month. This entire scheme is overseen and run by an organization called the Pension Fund Regulatory and Development Authority (PFRDA).

So why does NPS deserve a place in your retirement portfolio?

1. Professional management at low cost

NPS is considered one of the lowest-cost investment options. In this, your money is managed by expert pension fund managers (PFM) appointed by PFRDA. Its (NPS's) regulated structure ensures that there is complete transparency in it, everyone is assured, and investors get complete security.

2. Market-linked returns and the power of compounding

In NPS (National Pension System), money is invested in places like equity (stock market), corporate bonds, government securities, and alternative investment funds (AIF). This is the reason why it can give higher returns in the long run than an FD investment. You can choose where to invest your money according to your risk-taking capacity (asset allocation or 'active choice'), or you can also choose the option of 'auto choice' (life cycle). The special thing is that a special program (algorithm) reduces investment in equity as you grow older and increases investment in debt instruments, so that the risk remains right.

3. Flexibility and control - A subscriber can make these changes

Asset allocation can be changed up to four times a year, and you can change your pension fund manager once every year. You can switch between active and auto choice options. Not only this, but it gives you the freedom to change your strategy as your goals or market conditions change.

4. Disciplined wealth creation
NPS can help develop a habit of disciplined savings. Even a monthly SIP of ₹5,000 in NPS can grow to over ₹1 crore in 25-30 years, thanks to the power of compounding and equity participation. This amount, combined with tax-saving savings, helps build a large fund for retirement.

5. Flexibility of lifetime pension + lump sum
After the age of 60, you can wisely withdraw the funds deposited in NPS. As per the rules, you can withdraw up to 60% of the total amount as a tax-free lump sum or gradually as per your needs. With the remaining at least 40% of the amount, you have to compulsorily buy an annuity, so that you get a regular pension for your lifetime. If you wish, you can defer withdrawal till the age of 75 and choose to withdraw 60% of the amount gradually through the Systematic Lumpsum Withdrawal Plan (SLWP).

6. Portability and digital facility
Whether you change jobs or cities, your NPS account remains with you. Its entire system is digital, and you can invest, track, and manage your account online. Yes, National Pension System (NPS) can indeed be considered a strong financial option.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.