Employee retirement typically occurs at age 60 or 62, and business owners also retire at a certain age. Planning for retirement is essential to ensure a smooth transition from work to post-retirement life.
Saving for the future is crucial, and various policies, schemes, and investment options are available for post-retirement life.
The Government of India supports two popular schemes: the Public Provident Fund (PPF) and the National Pension System (NPS).
PPF offers guaranteed returns from the government in the form of interest on savings accounts.
The government announces the interest rate every three months. On the other hand, NPS involves investing in the stock market, offering higher return potential but also greater risk.
Regarding withdrawal of funds, PPF has a lock-in period of 15 years, while NPS allows for partial withdrawal shortly after opening the account. Still, a significant portion is locked in for retirement income.
Regarding income tax benefits, PPF allows for tax-free investment, interest earned, and the final amount, while NPS offers tax deductions on investments. Still, taxes are payable on the final withdrawal.
The maturity period for PPF is 15 years, and the entire amount can be withdrawn in a lump sum. In the case of NPS, after the age of 60, a maximum of 60% of the accumulated amount is available, and the rest must be used to purchase annuity plans for retirement income.
PPF is suitable for those seeking guaranteed returns, tax exemption, and steady growth and are not prioritizing immediate withdrawals.
On the other hand, NPS is suitable for those comfortable with some risk over the long term, seeking higher returns, and not needing all the money immediately after retirement.
Financial experts recommend investing in PPF and NPS to benefit from security, tax benefits, and growth potential. Starting to invest early can lead to more significant benefits.