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NPS withdrawal options: A guide to accessing your retirement funds


When it comes to the National Pension System (NPS), understanding withdrawal options is crucial for managing your retirement savings effectively. Here’s a breakdown of how you can access your funds, whether you need liquidity along the way or upon retirement:

Partial withdrawal after five years:

After completing five years in the NPS, you can make partial withdrawals from your Tier-I retirement account. This allows you to access up to 25% of your own contributions for specific reasons such as illness treatment, education funding, or property purchases. Keep in mind that withdrawals are limited to three times during the entire investment period.

Complete, premature withdrawal:

While premature withdrawal is possible before turning 60, it comes with certain conditions. You must have invested in NPS for a minimum of five years before withdrawing. Upon premature exit, you can withdraw up to 20% of the corpus as a lump sum, with the remaining 80% used to purchase an annuity plan.

Final exit at maturity:

Upon reaching 60 years of age, you can make your final withdrawal from the NPS. This allows you to withdraw up to 60% of the corpus as a tax-free lump sum. The remaining 40% must be converted into annuities, providing a steady income stream for retirement.

Staggered withdrawal till 75 years of age:

Introduced in 2023, the staggered withdrawal option offers flexibility in accessing your lump-sum component. Instead of withdrawing the entire amount at once, you can opt for systematic withdrawal in monthly, quarterly, half-yearly, or annual modes until you reach 75. However, 40% of the corpus still needs to be annuitized as per regulations.

Navigating NPS withdrawal:

Whether you need partial liquidity or are planning your retirement exit strategy, understanding NPS withdrawal options is essential. By leveraging these options effectively, you can manage your retirement funds according to your financial goals and lifestyle needs.

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