If you’re 40 and haven’t begun planning for retirement, don’t stress! You can still set yourself up for a comfortable future with the National Pension System (NPS). This program helps you build a substantial retirement fund and provides a monthly pension. Want to know how much you need to invest to have over 1 crore in your account and receive at least Rs 80,000 each month by the time you’re 60?
NPS Investment
The NPS is a government initiative designed to support people in their retirement years. Any Indian citizen can participate and create a solid pension plan along with a good lump sum for their later years. Since NPS is market-based, the returns aren’t guaranteed, but over time, you can expect to earn a decent return. Once you hit 60, you can withdraw 60% of your total NPS investment as a lump sum, which acts as your retirement fund. The remaining 40% must be used to purchase an annuity, which will provide your pension. The amount you receive will depend on the specifics of your annuity.
If you’re planning to invest in NPS at 40 and aim for that 1 crore fund along with an Rs 80,000 monthly pension, you’ll need a solid strategy. Start by investing Rs 20,000 each month in the Balanced Lifecycle Fund through NPS, and increase your investment by 10% every year. Stick with this plan for 20 years, and you’ll end up investing a total of Rs 1,37,46,000 over that time.
How much will your retirement fund grow?
If you earn a 10% return, you’ll rack up Rs 1,70,86,448 in interest. So, when you combine your initial investment of Rs 1,37,46,000 with that interest, you’ll end up with Rs 3,08,32,448. If you decide to set aside 60% of that total for your retirement fund, you’ll have Rs 1,84,99,469. The remaining 40%, which is Rs 1,23,32,979, will go into an annuity, and that’s where your pension will come from.
What will your pension look like?
With 40% of your total amount, or Rs 1,23,32,979, invested in an annuity that yields an 8% return, you can expect to receive Rs 82,220 each month as your pension.
What’s a Balanced Lifecycle Fund?
A Balanced Lifecycle Fund (BLC) spreads investments across three main areas: equity, corporate bonds, and government bonds. For those under 45, 50% of the investment is allocated to equity. As you age, that percentage gradually decreases. By the time you hit 55, only 35% will be in equity, with a stronger focus on safer investments like government bonds.
