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Mutual Funds, Financial Planning Expert - Answered on May 01, 2024

Asked on - Mar 26, 2024Hindi

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Whether NPS (National pension scheme) scheme is good for young employee of the age group of 25 to 35.
Ans: Yes, the National Pension Scheme (NPS) can be a beneficial retirement savings option for young employees in the age group of 25 to 35. Here are a few reasons why:

Long Investment Horizon: Young individuals have a longer investment horizon, allowing them to benefit from the power of compounding. By starting early, they can contribute smaller amounts regularly and accumulate a substantial corpus over time.
Tax Benefits: NPS offers attractive tax benefits under Section 80CCD(1B) of the Income Tax Act, allowing individuals to claim an additional deduction of up to Rs. 50,000 over and above the limit of Rs. 1.5 lakh available under Section 80C.
Choice of Investment Options: NPS provides flexibility in choosing between equity (E), corporate debt (C), and government securities (G) funds based on risk appetite and return expectations. Young investors with a higher risk tolerance may opt for a higher allocation to equity, which has the potential to generate higher returns over the long term.
Low Cost: NPS has one of the lowest fund management charges among pension products in India, making it a cost-effective option for retirement planning.
Portability: NPS is portable across employers and locations, allowing individuals to continue investing in the same account even if they change jobs or relocate.
Pension Annuity: At retirement, a portion of the NPS corpus can be withdrawn as a lump sum, and the remaining amount must be used to purchase a pension annuity, providing a regular income stream during retirement.
However, it's essential to consider factors such as liquidity needs, risk tolerance, and other investment goals before investing in NPS. Young investors should assess their overall financial situation and consult with a Certified Financial Planner to determine if NPS aligns with their retirement planning objectives.
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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