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How relevant is NPS as a retirement tool for a 35-year-old?

Dhirendra Kumar sheds light on the reliability of NPS as a retirement tool

How relevant is NPS as a retirement tool for a 35-year-old? Also, considering the fact that different ELSS funds have different investment strategies, how many tax-saving funds should one hold?
- Pulkit Soni

NPS is quite useful specifically if you have enough savings after exhausting your 80C limit. So, an additional Rs 50,000 investment in NPS gets you an additional tax break, which I think is very useful. NPS has also improved in terms of its tax treatment and asset allocation. You can now go up to 75 per cent into equity. So, if you have enough resources and if you can invest then, by all means, consider NPS, as it'll save your additional taxes.

To answer your second question, don't bother about different strategies of ELSS funds. Just choose a good tax-saving fund which has a full market cycle experience. This is important because if you're investing over long periods (five-fifteen years), you'll find that the difference in returns across funds is not that much. So, it is very hard to guess which one will be the best performing fund for your investment timeframe. So don't bother.

Although we have some conservative and some aggressive tax-saving funds, it's not worthwhile to handpick among these, as you are getting locked into these funds for three years anyway on a rolling basis. So, I would say that just choose a good fund, be at it and don't clutter your portfolio.

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