National Pension System (NPS) is a market-linked scheme that helps you save for your retirement. The NPS voluntary model is available to all the citizens of India, including those residing abroad, between the ages of 18 and 70 years. It was launched by the Central Government to help individuals have an income in the form of a pension to look after themselves during retirement. NPS offers tax benefits on investments and withdrawals, making it an attractive retirement savings option. On that note, let’s find out at 25, how much you need to invest per month to retire with Rs 1 lakh pension.
Also read: NPS Vatsalya: How can you generate Rs 100 crore retirement corpus for your child at 60 years of age?
What is NPS?
National Pension System is a market-linked defined contribution scheme that helps you save for your retirement. The scheme is simple, voluntary, portable and flexible. It is one of the most efficient ways of boosting your retirement income and saving tax. It allows you to plan for a financially secure retirement with systematic savings in a planned way.
What are investment options in NPS?
NPS in India offers two kinds of investment options to investors: active choice investment and auto choice investment.
Active choice investment in NPS
In the active choice investment, investors decide to invest in their choice of securities according to their risk appetite and age.
Auto choice investment in NPS
In auto choice investment, the scheme manager chooses the securities to invest on your behalf based on the age slab of the investor.
What are benefits of NPS?
- Flexible
- Simple and Tax efficient
- Portable
- Regulated and Transparent
- Dual benefit of Low Cost and Power of Compounding
- Online Access
Types of NPS accountsThe
NPS scheme is structured into two tiers
Tier-I account :
This is the permanent retirement account into which the regular contributions made by the subscriber and/or their employer are credited and invested as per the scheme/fund manager chosen by you.
Tier-II account :
This is a voluntary/optional withdrawable account that is allowed only when you have an active Tier I account. The withdrawals are permitted from this account as and when you require.
NPS calculation conditions
Monthly Contribution: XX
Investment duration: 33 years
Annual increase in contribution: 5 per cent
Annuity rate of return: 6.75
NPS Calculation
We are calculating the NPS corpus for the non-government sector with:
Investment mix: 75% equity, 25% government bonds
Check the calculation below.
How much do you need to invest per month to retire with Rs 1 lakh pension?
To retire with Rs 1 lakh pension, one has to invest Rs 5,000 per month.
NPS Calculation: What will be your retirement corpus with Rs 5,000 monthly investment?
Total investment during that period will be Rs 54,73,411. The estimated capital gains will be Rs 3,90,95,955, and the estimated retirement corpus will be Rs 4,45,69,366.
NPS Calculation: What will be your lump sum withdrawal amount?
At the age of 60, you can withdraw an estimated of Rs 2,67,41,620.
NPS Calculation: What will be your monthly pension?
Your estimated monthly pension will be Rs 1,00,281.
DISCLAIMER: Not financial advice; invest at your own risk
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