We have always heard our parents say that we don’t have a Money Tree to keep plucking money from there for the expenses, especially when we are facing some hard times. But what if I tell you there is a Money Tree you can plant and keep plucking the fruits after retirement?
You can plant a small seed by starting an investment in NPS (National Pension Scheme), water it by investing a portion of your salary or your income every month, and keep adding fertilizers to the soil in the form of reviewing the investments allocation to yield the best fruit in the form of returns.
Here’s how you can plant this tree called NPS and as early bearing fruits claim the tax benefits.
Let’s say, you are a 25-year-old, recently got a nice permanent job and you are looking forward to investing funds to secure your retirement income.
By doing so, every month you can earn ₹76,566 which will help you easily live a comfortable life after retirement without being dependent on anyone.
How do the returns in NPS work, you may ask?
The withdrawal rules for NPS are that after retirement i.e. 60 years, you can withdraw 60% of the total sum as a tax-free lump sum amount, and for the remaining 40% you have to purchase an annuity plan.
During that time your funds get invested in the Asset class of Government Bonds, Equities, or Debt securities. You can choose how much you want to allocate in each class but there has to be a 25% allocation in debt securities. The returns from NPS are affected due to factors like asset allocation, market performance of securities, investment choices, duration of investments, etc. That’s why you should keep reviewing the investments in NPS at least once a year to optimize the returns.
Isn’t it a real Money tree? What do you think, put out your thoughts in the comments below!