Retirement Plan: If you want to maintain a strong financial position after retirement and not have to depend on anyone, the National Pension System (NPS) can prove to be a reliable option for you. This scheme allows you to build a large corpus until retirement and receive a fixed monthly pension thereafter. If you invest time and money wisely, saving just ₹200 daily can lead to a future pension of up to ₹50,000 per month.
What is NPS?
The NPS was launched in 2004 for government employees, but after 2009, it was made available to all citizens. Under this scheme, you make regular deposits throughout your working years. At age 60, you can withdraw a portion of the accumulated funds and purchase an annuity with the remaining amount, receiving a monthly pension.
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Tax benefits are also available
NPS is also a great tax-saving option. It offers a deduction of up to ₹1.5 lakh under Section 80C. Furthermore, it falls under the EEE category, meaning investment, interest, and maturity are tax-free.
What should I do to earn a ₹50,000 monthly pension?
According to NPS rules, at least 40% of the NPS corpus must be invested in purchasing an annuity upon retirement. The remaining 60% can be withdrawn in a lump sum. If you expect a monthly pension of approximately ₹50,000 after retirement, you need an NPS corpus of approximately ₹2.5 crore. Let’s assume you start investing in NPS at the age of 24 and deposit ₹6,000 every month. By the age of 60, or in 36 years, your total deposit will be approximately ₹25.9 lakh.
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How much return will you get?
If you earn an average annual return of 10% from NPS over the long term, your corpus will grow to approximately ₹2.54 crore by retirement. Purchasing an annuity with 40% of this amount, or approximately ₹1.02 crore, can easily yield approximately ₹6 lakh annually and a monthly pension of approximately ₹50,000.
Why is this scheme special?
NPS is a safe and long-term investment option that ensures financial security in old age. If you start investing early and continue to make regular deposits, it’s quite possible to have a large corpus and a good pension by retirement.