NPS calculator: How to get Rs 1 lakh as pension every month by investing in NPS?

NPS calculator pension: How much to invest in NPS to get 1 lakh pension? Retirement planning is crucial for everyone since sufficient money to cover expenses post-retirement is a must. National Pension System (NPS) is a voluntary specified contribution pension scheme in India, overseen by the Ministry of Finance, governed by the Pension Fund Regulatory and Development Authority (PFRDA). 

NPS was introduced by the central government to help individuals have income in the form of pensions to take care of their retirement needs.

NPS is one of the most efficient ways of boosting your retirement income and saving tax and allows investors to plan for a financially secure retirement with systematic savings in a planned way.

NPS voluntary model is available to all the citizens of India including those residing abroad, between the age of 18 and 70 years.

"There are many ways to save specifically for retirement and NPS is among the better ones. While other forms of investing such as equity mutual funds may provide better returns or higher flexibility and liquidity, the NPS helps you stay locked in till retirement thus ensuring a fail-safe for your retirement planning," said AR Hemant, AVP, BankBazaar.com. 

"Typically one can save 1.5 lakh under 80C and an additional 50,000 under 80CCD(1B). Under 80CCD(2), your employer can deduct 10% of your basic and DA without limit," he added. 

Based on the investor's age, contribution amount, age limit to make contributions, expected return, and annuity slab, the returns from NPS differ. So let's know how an NPS investor can accumulate a monthly pension of Rs 1 lakh.

Also read--NPS: Tax benefits of Rs 2 lakh and monthly pension of Rs 75,000; here is how it works

How can a 25-year-old ensure a Rs 1 lakh a month pension at age 60?

One of the ways is start your investment in NPS is to start it at an early age. NPS mutual funds are market-linked and also give you compound interest. The sooner one starts, the better will be the returns at maturity, with a lesser per-month contribution.

Let's assume an annualised average return of 8 per cent on the NPS investment. If one starts to invest in NPS at age 25 until he/she reaches the retirement age of 60, he/she will have a period of 35 years to accumulate wealth.  

One must note, at maturity, the investor is allowed to withdraw up to 60 per cent of the invested money as a lump sum in an NPS scheme. Then, the NPS fund reinvests the rest of the money in an investment plan, which we assume would give you a return of 8 per cent on an annualised basis.

ALSO READ : How to accumulate Rs 10 crore corpus in 10 years? 

Here's the calculations: 

Age: 25 years

Retirement age: 60 years

Total contribution: 35 years

Expected return: 8%

Would like to purchase an Annuity for 80% 

Total Investment: Rs 34,23,000

Total Corpus: Rs 1,88,19,777

Total Gain: Rs 1,53,96,777

One would need to invest Rs 8,150 per month to generate an expected pension of Rs 1,00,228 per month. For that, your yearly investment should be Rs 97,800, translating into a monthly investment of Rs 8,150 and a daily investment of Rs 271.6 approximately.

Source: NPS official website

(Disclaimer: NPS investments are subject to market risks. Do your research or consult your advisor before investing.)

ALSO READ: NPS vs mutual fund SIP: Which is a better investment plan for retirement? | Explained