Dhirendra Kumar suggests to choose the highest possible equity allocation if really have to invest via NPS
05-Dec-2017 •Research Desk
Should NPS be a part of my financial plan? What should be the allocation at different ages?
You don't need an NPS if you have invested in a balanced fund, have a term insurance and a health insurance, and provided you are disciplined about it. In NPS, the money is locked in till your retirement. It's a plus point if you are an undisciplined person. You cannot withdraw from NPS before retirement unless you fit the given conditions. It enforces a discipline and for many people it is an advantage. But the ones who are disciplined, understand the importance of saving regularly and not taking that money out, they don't need a complicated plan.
If you have to take NPS, you should be aggressive with it because the most aggressive plan in NPS is also reasonably conservative. Get the highest possible equity allocation of 50 per cent and keep it till 5 years before your retirement. Only around that time, consider a part of it getting into fixed income. Even after your retirement at age 60, if you have to hold your NPS without converting it in annuity, an allocation of 50 per cent to equity and debt is a reasonably conservative one.