NPS: How to get Rs 6.50 crore retirement corpus and Rs 1.62 lakh monthly pension
Learn how regular investment in the National Pension System (NPS) can help investors build approximately 6.50 crore retirement corpus and an estimated monthly pension of Rs 1.62 lakhs by the age of 60.
National Pension System (NPS) is one of the most popular retirement plans for investors. It is a central government-backed scheme to help investors provide financial security post retirement. You can start investing at the age of 18 years and invest till 75 years of your age. Upon reaching your retirement age of 60, the investor can withdraw up to 60 per cent of the accumulated corpus and the rest 40 per cent can be spent to buy an annuity plan, return from which will help you get a monthly pension. Let’s understand the calculation of Rs 6.50 crore retirement corpus and Rs 1.62 lakh monthly pension.
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(Disclaimer: Our calculations are projections and not investment advice. Do you own due diligence or consult an expert for financial planning)
How does it work
The starting age to invest is 18 and lasts till 75. You can invest a lump sum monthly and contribute till you turn 60. At retirement, you can withdraw up to 60 per cent from the entire retirement corpus, and the rest at least 40 per cent should be moved to buy an annuity plan, return from which will help you receive a monthly pension.
How is NPS annuity calculated?
Suppose you started investing at the age of 25. Upon reaching 60 years of age you decide to withdraw 60 per cent of the accumulated corpus and turn the rest 40 per cent into an annuity plan. You will be entitled to a monthly pension.
Breakdown of Rs 6.50 crore retirement corpus and Rs 1.62 lakh monthly pension
Age of investing: 25 years
Years of contribution: 35 years (up to age 60)
Monthly contribution: Rs 10,000
Expected rate of return: 12% p.a (upon 75% equity exposure)
Annuity purchase: 50% of the accumulated corpus
Expected annuity rate of return: 6% per annum
Total investment
Monthly contribution: Rs 10,000
Number of years: 35 years
Total investment: 42,00,000
Accumulated corpus
With the estimated annualised return of 12 per cent, the accumulated corpus after 35 years would be estimated Rs 6,49,52,691.
Total gains
With 12 per cent annualised return, you will be receiving estimated total gains of Rs 6,07, 52, 691.
Annuity purchase
At the age of 60, 50 per cent of the accumulated corpus should be moved to buy an annuity plan.
Monthly pension
With the estimated annualised return of 6 per cent from annuity investment, the expected monthly pension will be Rs 1,62,382.
Tax on annuity purchase
The entire amount that is withdrawn at 60, and that is used to purchase an annuity is tax-exempted. However, the amount received from the annuity plan will be taxed according to the applicable income tax rates.