When planning for retirement, every rupee matters. Maximizing your retirement corpus isn't just about returns, it's also about minimizing tax impact. Choosing the right investment vehicle for retirement can significantly improve your post-retirement income. After publishing my last article on How to Use NPS Tier II Account for Higher Returns & Greater Flexibility , one question kept popping up: If the goal is to purchase an annuity at retirement, why not just build the corpus using mutual funds and then buy the annuity? 💡 Here's why I believe NPS is a smarter choice over mutual funds for this purpose 👇 🔁 1. No Tax on Rebalancing With NPS, I can change: My Pension Fund Manager ✅ My asset allocation ✅ My investment style ✅ …without paying any capital gains tax ! That means I can gradually shift from equity to debt as I near retirement, without losing money to taxes . 👉 Try doing this in mutual funds, and you’ll be hit with tax at every switch! 🛡️ 2. EEE Structure ...
NPS is Misunderstood The National Pension System (NPS) is often misunderstood. Unlike other investment vehicles, NPS is specifically designed for retirement planning . Every feature of this product is geared toward long-term investing , making it fundamentally different from conventional investment options. Financial security is a basic human need. For those earning a salaried income, receiving a monthly paycheck provides a sense of stability. Naturally, we want to maintain the same sense of security even after retirement. One of the best ways to generate a steady post-retirement income is through an annuity . An annuity works by investing a lump sum amount, which then provides a fixed income at predefined intervals — in this case, monthly payments. Importance of Annuities Scientific research has proven that humans are not biologically wired to make complex decisions repeatedly. Our brains tend to rely on shortcuts, which can often lead to poor decision-making . Emotions like f...