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Should a 52-year-old invest in National Pension System (NPS)?

Dhirendra Kumar makes a case for mutual funds over NPS as an investment option for a 52-year-old


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Is it advisable to invest in NPS at the age of 52? I am already investing in mutual funds.
- Rudra

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NPS, as an investment option, has improved. In fact, NPS has also been liberalised and now you can keep investing in it till you turn 70 if you are still working. Earlier, NPS was allowed to invest only up to 50 per cent in equity. Now, the equity allocation limit has been increased to 75 per cent.

However, if you are investing in mutual funds, you can do well without investing in NPS. This is because NPS will lock 40 per cent of your accumulation. On reaching the age of 60, one can conveniently withdraw 60 per cent of the investments, while 40 per cent of the money will have to be converted into an annuity. The money can continue to be there even after the age of 60 but whenever you withdraw, you will have to use at least 40 per cent of the corpus for buying an annuity. 60 per cent of the withdrawal money will be tax-free and better than mutual funds in that sense. But if you want to keep things simple and don't want to unnecessarily lock your money for an annuity, continue with mutual funds only.

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