As an employee in a private company aged 42, can I withdraw my 98K NPS amount and invest in mutual funds?

Ans: You can close your NPS account prematurely only after 10 years of opening the account. And if you do, you have to utilise 80 per cent of the corpus for buying an annuity plan. Here again, you can be exempted if your total corpus does not exceed Rs 5 lakhs. In such cases, you don't have to buy an annuity plan.

You must get your regular savings bank account converted into an NRE or an NRO account. That is mandatory.

Once your bank account is converted, you need to get your status changed in the NPS records from a resident Indian to an NRI.

Ans: As you approach retirement, it's natural to reassess your financial strategy. Consider the tax benefits of deferring your NPS withdrawal while investing your PF amount wisely. A Certified Financial Planner can guide you in allocating your funds between fixed income and equity, balancing stability with growth potential. Reflect on your long-term goals and seek professional advice to ensure a secure and fulfilling retirement journey.

Ans: Congratulations on reaching 70! It's great that you opened an NPS account for tax benefits. Let's discuss your situation and withdrawal options:

1. NPS Withdrawal Rules:

Lock-in Period: NPS has a lock-in period until you turn 60 or retire from your regular job (whichever is earlier).

Partial Withdrawal: After 60, you can withdraw 60% as a lump sum and invest the remaining 40% in an annuity that provides regular income.

Full Withdrawal with Conditions: At 70, you can withdraw the entire accumulated corpus (your contributions and earnings) if it's less than Rs. 5 lakh.

2. Understanding Your Situation:

Full Withdrawal Possible: Since your total contribution is Rs. 1 lakh (2 years * Rs. 50,000) and you're 70, you can likely withdraw the entire amount with accrued interest.

Tax Implications: The entire withdrawn amount (including accrued interest) might be taxable as per your income tax slab.

3. Considering Alternatives (Optional):

Annuity for Regular Income: If you need regular income, consider using a portion of the corpus to purchase an annuity. This might provide a steady stream of income post-retirement.
Here's the key takeaway: You can likely withdraw the entire NPS corpus since it's less than Rs. 5 lakh. However, the withdrawal will be taxable. Consider consulting a tax advisor for specific tax implications.

Remember, financial planning is an ongoing process. Consulting a Certified Financial Planner (CFP) can help you make informed decisions about your retirement income and tax strategies.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello;

You may retain the PF as it is, till the age of 58. It will continue to draw tax free interest.

Else you may withdraw it and reinvest in NPS but note that withdrawals from NPS before 60 age, are highly restricted.

Best wishes;