Retiring with NPS? A simple 25% move could save you lakhs. Here is how

What if one simple move could save you lakhs in retirement—and the system doesn’t advertise it? Wealth educator Neil Borate just flagged an NPS hack that lets you legally reduce your annuity burden and unlock more tax-free cash when you retire.

“You can use partial withdrawals to reduce mandatory annuity in NPS,” Borate posted on X, unpacking a little-known but powerful strategy within the National Pension System (NPS).

Here’s the problem: when your NPS account matures at 60, 40% of your corpus must go into annuities, which currently yield only 6.2%–6.85%. That’s low, especially when you've grown your money over decades in equity and debt funds.

But NPS allows 25% partial withdrawal of your own contributions—not the employer’s—before maturity. And if done strategically, say around age 59, this reduces your final corpus on record and thus the mandatory annuity outlay.

Example: you invest ₹10,000/month in NPS for 30 years, increasing by 10% annually. That’s ₹2 crore contributed, which grows to ₹6 crore at 10% CAGR. Under normal rules, ₹2.4 crore (40%) goes into annuity.

But if you withdraw ₹50 lakh (25% of ₹2 crore) before maturity, your corpus drops. Now only ₹5.5 crore is split—₹2.2 crore into annuity, ₹3.3 crore as tax-free lump sum. Your annuity share drops from 40% to just 36.6%.

The catch? Withdrawals are only allowed for specific reasons—education, marriage, home purchase, health expenses, disability, or starting a business.

It’s a rare chance to beat the default system—without breaking any rules. As Borate points out, this is one of the few ways to restructure your retirement outcome before the lock-in kicks in.

For serious savers eyeing early control, this isn’t just a trick—it’s a financial edge.