National Pension System (NPS) has emerged as the most reliable and robust option for long-term investment today. People often wonder if it’s possible to receive a guaranteed monthly pension of ₹50,000 after retirement. But to achieve this, you need to start investing today with a sound strategy and unwavering discipline.
How much money is needed for a monthly pension of ₹50,000
The first step in retirement planning is to understand how large a corpus you’ll need in the future. If you want a monthly pension of ₹50,000, that means you need a solid income of ₹6 lakh annually.
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According to the current NPS rules, at retirement (age 60), it is mandatory to invest at least 40% of the total corpus in an annuity. This annuity fund provides you with a lifelong pension. Assuming an average annual return of 6% on annuities, you need to have an annuity fund of approximately ₹1 crore to receive an annual pension of ₹6 lakh.
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Since this ₹1 crore represents only 40% of the total corpus, your total NPS corpus should be approximately ₹2.5 crore. You can withdraw the remaining 60%, or ₹1.5 crore, as a lump sum, which is completely tax-free and provides a solid foundation for your other old-age needs.
Investing from the age of 30
Now the question is, how can you build this mountain-like corpus of ₹2.5 crore by the age of 30? You have a solid 30 years to invest. The longer the time, the better the magic of compounding works.
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Let’s say you’re 30 today and continue investing for the next 30 years. If your NPS portfolio generates an average annual return of 10% to 12%, you’ll need to invest approximately ₹12,000 to ₹14,000 per month to achieve your goal of ₹2.5 crore.
If you’re unable to save such a large sum initially, you can adopt a ‘step-up’ strategy. In this, you start with a small investment and increase your investment by 5-10% each year as your salary increases. This approach makes your investment journey even more stable.
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Benefits and Security of Investing in NPS
NPS is not just a pension scheme; it’s a powerful combination of tax savings and future wealth creation. Your money is invested in a mix of equity (stock market) and debt (government bonds), which has the potential to deliver much higher returns than bank FDs over the long term.
From a tax perspective, in addition to the ₹1.5 lakh deduction under Section 80C, an additional ₹50,000 tax deduction is also available under Section 80CCD(1B). This means you can enjoy double tax benefits on your hard-earned money. Additionally, 60% of the amount withdrawn upon maturity is completely tax-free.
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The Reward of Starting Early
“Time” is the most powerful weapon in retirement planning. If you start investing at 40 instead of 30, reaching ₹2.5 crore could take you more than ₹40,000 a month instead of ₹14,000. Your 30s are the age when you have both energy and time, making it the best time to secure your future.