NPS Retirement Planning: Want Rs 1 lakh monthly NPS pension? This is how much you should contribute if your age is 25, 30, 35, or 40 years
NPS Monthly Pension: Retirement planning is important for everyone since one needs a regular income source to meet their daily expenses. There are many retirement, senior citizen, and annuity schemes that provide monthly, quarterly, half yearly, or yearly income. One of the popular retirement schemes is National Pension System (NPS). In the scheme, NPS account holders can make lump sum or monthly contribution. The starting age for investment is 18 years, and the maximum is 75 years. In this write-up, know more about NPS and also about the estimated monthly contribution to get Rs 1 lakh monthly pension at investment starting ages of 25, 30, 35, and 40.
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(Disclaimer: Our calculations are projections and are not suggestions. Do your own due diligence or consult an expert before retirement planning.)
How NPS works
NPS has Tier I and Tier II accounts. In a Tier I account, the NPS account holder can withdraw money at 60. Contributions to a Tier-I account provides tax benefits.
Who can contribute to NPS?
Government employees (central and state), private sector employees, self-employed, and individuals can contribute to NPS. The scheme was started for central government employees in 2004 but was opened to all in 2009. In 2024, the government also opened the scheme to minors under the name of NPS Vatsalya.
NPS tax benefits
Private sector employees can get tax deduction up to 10 per cent of their salary (basic+DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under Section 80 CCE.
Apart from that NPS Tier-I account holders can also get an extra tax deduction up to Rs 50,000 under Section 80 CCD(1B). So, their overall tax benefit will be Rs 2 lakh.
NPS tax benefits
Public and private sector employees also get tax benefits on their employer's contribution. They are eligible for tax deduction up to 10 per cent of their salary (Basic + DA) (14 per cent if such contribution is made by Central Government) contributed by the employer under Section 80 CCD(2) over the limit of Rs. 1.50 lakh under Section 80 CCE.
NPS Withdrawal Conditions
At 60 years of age, NPS Tier-I account holders get the option of withdrawing their retirement corpus. They can also defer withdrawal of annuity by 3 years and lump sum by 10 years, or they can continue contributing till 75. However, they can withdraw their corpus at any time during this contribution.
NPS Withdrawal Conditions
At 60 years of age, an NPS account holder is allowed to withdraw up to 60 per cent corpus as a lump sum. From the rest of the 40 per cent amount, they need to purchase annuity to get a monthly pension. If they want, they can purchase annuity from the entire 100 per cent corpus.
NPS pension conditions
In our calculations, we will calculate the investment amount if one starts their NPS contribution at ages 25, 30, 35, or 40 years. We assume 10 per cent return on NPS contribution and 6 per cent return on annuity. We will assume 60 per cent lump sum withdrawal and 40 per cent annuity withdrawal at 60.
NPS investment amount for Rs 1 lakh monthly pension starting NPS contribution at 25
The estimated monthly contribution in such a condition should be Rs 13,100. The total investment in 35 years will be Rs 55,02,000, estimated gains will be Rs 4,46,48,425, and the estimated corpus will be Rs 5,01,50,425.
NPS investment amount for Rs 1 lakh monthly pension starting contributing at 30
The estimated monthly contribution in this case should be Rs 22,000. The total investment in 30 years will be Rs 79,20,000, estimated gains will be Rs 4,22,25,158, and the estimated corpus will be Rs 5,01,45,158.
NPS investment amount for Rs 1 lakh monthly pension starting contributing at 35
The estimated monthly contribution in this case should be Rs 37,380. The total investment in 25 years will be Rs 1,12,14,000, estimated gains will be Rs 3,87,96,342, and the estimated corpus will be Rs 5,00,10,342.
NPS investment amount for Rs 1 lakh monthly pension starting contributing at 40
The estimated monthly contribution in this case should be Rs 65,300. The total investment will be Rs 1,56,72,000, estimated gains will be Rs 3,43,28,009, and the estimated corpus will be Rs 5,00,00,009.