NPS vs Mutual Fund SIP: Which is better for retirement planning? Know where you will get more returns..
Nowadays people have started thinking about their retirement planning in advance. For this, some do Mutual Fund SIP, while some consider NPS (National Pension System) better. But the question is where will you get more returns in the long term? And which option is more convenient and beneficial?
If you are also in this confusion, then here we are explaining to you the special features of both SIP and NPS in simple language, so that you can decide for yourself which option will be best for you.
SIP can come out ahead if we talk about returns
In Mutual Fund SIP, the investor can decide whether to invest money in an equity fund or debt. If you choose equity funds for the long term, then you can get a return of up to 10–15% annually. On the other hand, the share of equity in NPS is limited (maximum 75% in Tier-1).
That is why the return from NPS usually remains between 8–10%. The scope of returns in SIP is higher, but the risk is also a little higher.
NPS is more beneficial for saving tax
If you aim to save tax, then NPS is a good option. In this, you can get an exemption of up to ₹ 1.5 lakh under 80C and an additional ₹ 50,000 under 80CCD (1B). That is a total tax saving of up to ₹ 2 lakh. On the other hand, tax benefits in SIP are available only in ELSS funds, and in that too, exemption is only up to ₹ 1.5 lakh under 80C.
In SIP, you can stop investing whenever you want, withdraw money, or increase or decrease the investment amount. That is, you have complete freedom. However, there are strict conditions for withdrawing money in NPS. You can withdraw the entire money only at the time of retirement. And even then you will get 60% of the amount in a lump sum, and the remaining 40% will have to be used to buy a pension.
Who is how safe?
NPS is a government-managed scheme and its funds are invested in the stock market as well as government bonds and debt instruments. Therefore, there is less volatility in it. If you choose equity funds in SIP, the risk is higher, but the returns can also be better accordingly.
Which is better for whom?
If you are employed, want to save tax, and want a safe and fixed plan for retirement, then NPS will be better for you.
If you are looking for higher returns, can take a little risk, and want to make money according to your goals, then SIP is a better option for you.
So what to do? SIP or NPS?
Let us tell you that both have their importance. If you want, make NPS the base of your retirement security and also make money for different goals through SIP. This will give you the benefit of tax savings, returns, and liquidity. If you are thinking about retirement planning, then make the right decision according to your needs.
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