NPS for retirement planning: Today we will tell you that if you are 25 years old, then how much investment will be required to get a monthly pension of about Rs 1.5 lakh and a retirement fund of about Rs 4.54 crore after 35 years.
National Pension System (NPS) proves to be very helpful for private sector employees in planning their retirement. By starting investing in NPS early, a good fund can be deposited for retirement and a good monthly pension can be arranged. Although investing in NPS does not guarantee you a fixed pension, but by investing in it early and wisely, you can make your retirement comfortable. Your pension depends on your chosen annuity scheme and the returns on it.
Today we will tell you that if you are 25 years old, then after 35 years, how much investment will be needed to raise a monthly pension of about Rs 1.5 lakh and a retirement fund of about Rs 4.54 crore.
How does NPS investment work? (NPS investment)
Under NPS, you have to use at least 40% of your corpus to buy an annuity from a Pension Fund Regulatory and Development Authority (PFRDA)-regulated Annuity Service Provider (ASP). The remaining 60% of your corpus can be withdrawn tax-free as a lump sum.
There are two types of accounts in NPS: Tier 1 and Tier 2. Tier 1 is your pension account, while Tier 2 is a voluntary savings account. To open a Tier 2 account, you must have a Tier 1 account. Remember that tax benefits are available only on Tier 1 contributions.
Tax exemption on investment in NPS
Apart from the tax exemption available on investment up to Rs 1.5 lakh under Section 80C, you can also claim tax exemption on annual investment up to Rs 50,000 under Section 80CCD (1B) in this scheme. Apart from this, 60% of the withdrawal maturity amount from NPS is tax-free.
Invest in NPS to get monthly pension of Rs 1.5 lakh
Let us know how much a 25-year-old should invest in NPS every month to get a monthly pension of Rs 1.5 lakh by the age of 60. We will also know how these investments can help in raising a retirement fund of Rs 4.54 crore.If you start investing in NPS at the age of 25 and aim to get a monthly pension of around Rs 1.5 lakh by the age of 60, then you need to know this:
Investment breakdown:
- This much investment will have to be made every month: To achieve the target of monthly pension of Rs 1.5 lakh, you will have to invest Rs 7,000 every month.
- Return on investment: Assuming an annual return of 12%, your investment will grow year after year.
- Total investment: During this period, you will invest a total of Rs 29,40,000.
- Total maturity value: By the time you retire, your total fund will be around Rs 4.54 crore.
Distribution of maturity value:
- Annuity reinvested: Out of the total amount, around Rs 1.82 crore will be used to buy annuity.
- Lump sum withdrawal: You can withdraw around Rs 2.72 crore in lump sum.
- Pension: In this way, you can expect to get a monthly pension of more than Rs 1.50 lakh.
