NPS CALCULATOR: AT 30, HOW MUCH SHOULD YOU INVEST TO SECURE RS 1 LAKH MONTHLY PENSION AFTER RETIREMENT?

The NPS, or National Pension Scheme, is probably the only feasible option available today that can provide a comfortable retirement corpus and arrange a steady income in the form of a pension once you retire. That said, there are multiple other investment options available, some of which might earn you better returns, such as mutual funds and stocks. Others, like fixed-income instruments such as FDs and bonds, offer guaranteed returns. However, none can match the NPS, as it provides decent returns with lower risk exposure due to periodic adjustments in how your money is invested across different asset classes.

NPS tax benefits:

NPS investors benefit from an additional tax deduction under Section 80CCD (1B). This provision allows you to claim a tax deduction of up to Rs 50,000 on NPS investments, separate from the Rs 1.5 lakh deduction available under Section 80C. In total, by investing in NPS, you can claim tax deductions of up to Rs. 2 lakh—Rs. 1.5 lakh under Section 80C and an additional Rs 50,000 under Section 80CCD (1B). This means that if you are in the 30% tax bracket, you could potentially save Rs 62,400 in taxes.

Also read: NPS: Want Rs 50,000 monthly pension? Know how much you need to invest

How NPS investment works

After maturity, you must mandatorily invest at least 40% of the amount in an annuity scheme, which will provide you with a regular pension after retirement. You also have the option to invest up to 100% of the corpus in an annuity. For non-taxable withdrawals, you need to invest 40% of the corpus in an annuity, while the remaining 60% can be received tax-free.

Now that we have briefly understood how NPS investment compares favorably to other market options and how much you need to invest in an annuity for tax-free withdrawal on superannuation, let’s explore how you can secure a monthly pension of Rs 1 lakh after retirement. For this, we will assume you are a salaried individual starting NPS investment at the age of 30. We will then calculate how much you need to invest each month to achieve a monthly pension of around Rs 1 lakh after you retire at the age of 60.

Also read: NPS Calculator: How much should you invest to get Rs 1 lakh pension per month?

NPS investment breakdown:

NPS start age – 30 years

Investment years – 30 years

Monthly investment – Rs 14,000

Total investment in 15 years – Rs 50.4 lakh

Expected annual return – Moderate (12%)

Interest earned – Rs 4.44 crore

Total corpus after 30 years – Rs 4.94 crore

Now, if you invest 40% of this amount to buy an annuity scheme and get around 6% return annually, you will get Rs 98,838 per month as pension.

In summary, by starting NPS investment at the age of 30 with a monthly contribution of Rs 14,000, you could accumulate a corpus of approximately Rs 4.94 crore by retirement. Investing 40% of this corpus in an annuity scheme at a 6% return rate will provide you with a monthly pension of around Rs 98,838, bringing you close to your goal of Rs 1 lakh per month.

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