Retirement planning: 5 things to remember while investing in NPS

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Also Read: NPS new login rules: Two-factor Aadhaar authentication from April 1. Details here Dual-Tier Structure: NPS operates two structures. Tier-I account is the primary and mandatory account under NPS.

It is designed specifically for retirement savings. The Tier-II account is a voluntary savings account that provides more flexibility in withdrawals compared to the Tier-I account. It is an optional account and can be opened only if the subscriber has an active Tier-I account.

Long-term commitment: NPS is designed as a long-term retirement savings instrument. It is important to commit to the system for the long term to benefit from the compounding of returns. The longer your money stays invested, the more it can potentially grow.

Under Tier-I Account, subscribers on reaching the age of 60, can withdraw up to 60% of the accumulated corpus as a lump sum. This amount may also remain invested until the age of 75 and may be withdrawn systematically through the systematic lumpsum withdrawal (SLW) option. The remaining 40% must be used to purchase an annuity, providing a regular pension income.

It's important to note that NPS is primarily designed as a long-term retirement savings instrument, and withdrawals before the prescribed retirement age may have implications on the final corpus and annuity income. Asset allocation: NPS allows you to choose between equity, corporate bonds, and government securities. The allocation between these asset classes should be based on factors like your risk tolerance, age, and financial goals.