If you have deposited money in the National Pension System (NPS) for years, then the rules for withdrawing it after retirement depend on what is your total fund.
The choice will be decided based on how much money is available.
If your corpus is ₹8 lakh or less, you can withdraw the entire amount in lump sum or choose options like SLW/SUR. If your income is between ₹ 8 to ₹ 12 lakh, then you can withdraw up to ₹ 6 lakh in lump sum, the remaining money will have to be invested in SUR or annuity in at least 6 years. If your income is more than ₹ 12 lakh (non-government employees), you can withdraw up to 80%, but it is necessary to invest 20% in annuity so that you can get pension throughout your life. At least 40% annuity is required for government employees.
What is the difference between SLW and SUR?
SLW (Systematic Lump-sum Withdrawal) You will get a fixed amount every month, like ₹ 50,000. Whether the market goes up or down, you will get the same amount. SUR will sell a fixed number of units every month. The amount will depend on the market price. If the market rises, more money, if it falls, less. For example, if you have ₹1 crore and NAV is ₹10, there will be 10 lakh units. ₹ 50,000 will remain fixed in SLW, but if the market falls, more units will have to be sold. SUR will sell 5,000 units every month, but the amount will vary depending on the market.
What will happen if the market falls?
The income in SLW will remain stable, but in a falling market the fund may be exhausted quickly due to selling of more units. Units in SUR are safe, but monthly income may fluctuate.
Which is better for whom?
If you do not have any other income and have fixed expenses every month, then SLW is better. If you have rent, pension or other income and are not worried about market fluctuations, SUR may be better in the long run.
take care of taxes
SLW does not increase the tax-free limit. Withdrawals up to 60% are tax-free, more than that may be taxed.
What is wisdom?
If you choose SUR, keep aside money equal to 612 months of expenses in a savings account or FD. This is called bucket strategy. Ultimately, which option to choose depends on your other sources of income, risk appetite and life expectancy.