NPS Calculation: Want Rs 60,000 monthly pension by investing for 25 years? Here is how much money you need

NPS Calculation 2024: How much money do you need to invest in NPS starting at age 35 to get a pension of Rs 60,000 per month at 60? Retirement planning is often neglected or procrastinated despite a number of effective financial products being available today. One such powerful retirement planning tool is the National Pension System (NPS). Administered by the PFRDA, NPS enables working individuals to invest their money systematically in a market-linked plan to secure a stable income in the form of pension for their retirement years.

As a market-linked, defined-contribution investment scheme, NPS helps individuals aged between 18 and 70 years old work towards a monthly pension under its voluntary model, which is available to all citizens of the country. 

This article illustrates how much money needs to investing in NPS (voluntary), starting at age 35, to reach a pension target of Rs 60,000 per month upon turning 60, assuming an annualised return of 10 per cent. 

• Age: 35 years
• Retirement age: 60
• Total contribution: 35 years
• Contribution: Rs 22,425/month
• Expected Return: 10%
• Total corpus: Rs 3,00,02,192
• Total gain: Rs 2,32,74,692
• Total Investment: Rs 67,27,500 
• Retirement age: 60 years
• Expected return: 10%

Source: npstrust.org.in

The calculations described in the example above are indicative in nature.

What happens when an NPS account matures?

If the subscriber joins before age 60, they can withdraw up to 60 per cent of their savings as a lump sum at age 60, and the remaining 40 per cent must be used to purchase an annuity for pension (retirement fund body PFRDA has a specific list of annuity service providers).

If the subscriber joins at or after age 60, they can withdraw after three years. Again, up to 60 per cent can be taken as a lump sum, with the rest used for an annuity (if the total savings are under Rs 5 lakh, the amount is paid entirely as a lump sum).

How much pension can you get through NPS?

The pension amount a subscriber receives from NPS depends on factors such as the size of contributions, investment returns, and the amount of savings used to buy an annuity upon maturity. 

Investment in NPS is linked to market conditions, which means NPS doesn't claim any guaranteed benefits.