NPS: Want to boost your retirement corpus from Rs 2 cr to Rs 8.36 cr? This expert strategy can be effective
NPS Retirement Corpus: A delay in the NPS exit can help grow their retirement corpus and annuity amount exponentially. Delaying NPS exit by 15 years, from 60 to 75, can increase the value of their Rs 2 crore corpus by over 4 times.
Retirement Planning: National Pension System (NPS) is a retirement scheme for public as well as private sector employees, where one can invest from the age of 18 years till 75. Even though NPS is a market-linked scheme, it offers investment choices as per one's risk appetite with active and age-based (life cycle based) options. One has the liberty of making contributions as per their convenience either as lump sum or SIP. NPS has Tier I and Tier II accounts. Contributions in a Tier I account provide tax deduction to old tax regime taxpayers of up to 10 per cent of salary (basic+DA) under Section 80 CCD(1) within the overall ceiling of Rs 1.50 lakh under Section 80 CCE.
Not just that, taxpayers can also get tax deduction up to Rs 50,000 under Section 80 CCD(1B) over and above the overall ceiling of Rs 1.50 lakh under Section 80 CCE.
A disciplined investment in NPS helps in accumulating wealth that can help one to meet their retirement goals at age 60 and can offer a steady post retirement income. At that age, an NPS subscriber can withdraw up to 60 per cent lump sum amount from their retirement corpus. With the rest of the 40 per cent amount, they need to purchase annuity, the return from which provides them a monthly pension.
But at that stage, NPS account holders get two more options- they can defer the annuity withdrawal till 63 years of age and lump sum withdrawal till 75 years of age. During that period, they don't need to make any contribution to their retirement corpus, but they will get a return on it. In the second option, they delay their NPS exit till 75 years of age. A delay in the NPS exit can help grow their retirement corpus and annuity amount exponentially. Delaying NPS exit by 15 years, from 60 to 75, can increase the value of their Rs 2 crore corpus by over 4 times. Let's understand it through expert calculations-
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NPS contribution basic conditions
Before we start our calculations, let's put the basic conditions in place. We assume that you have a NPS retirement corpus of Rs 2 crore at the age of 60. You will get 10 per cent growth on your corpus till the age of 75 years.
NPS contribution basic conditions
You will withdraw the 60 per cent lump sum amount and will purchase the annuity from the rest of the 40 per cent amount.
NPS: What will happen if you exit at 60?
If you have a Rs 2 crore corpus and exit from NPS at 60, you can withdraw Rs 1.20 crore, and the annuity amount that you will get will be Rs 80 lakh.
NPS: What will happen if you defer annuity by 63 and lump sum by 75
If you defer your annuity by 63 years of age, the lump sum corpus, at 10 per cent growth, by that time will grow to Rs 2,66,20,000, a rise of Rs 66,20,000.
NPS: What will happen if you defer annuity by 63 and lump sum by 75
Annuity amount in the same period will increase from Rs 80 lakh to Rs 1,06,48,000, an increase of Rs 26,48,000.
Since you are continuing your lump sum corpus of Rs 2,66,20,00 till the age of 75, it will grow to Rs 5,01,26,978.
NPS: What will happen if you exit at 70?
Since you are not deferring your exit, you won't withdraw the annuity amount at 63. You will get 10 per cent annual growth on your Rs 2 crore corpus for 10 years. At that rate, your retirement corpus will grow to Rs 5,18,74,849.20.
NPS: What will happen if you exit at 70?
The lump sum withdrawal at that time will be Rs 3,11,24,909.52, and the annuity will be Rs 2,07,49,939.68. It means by delaying your NPS exit by 10 years, you can increase your retirement corpus by 160 per cent.
NPS: What will happen if you exit at 75?
If you exit at 75, you get 15 years more for growth of your retirement corpus. But that 15 years of growth can increase your retirement corpus by more than four times.
NPS: What will happen if you exit at 75?
At that stage, your retirement corpus will grow to Rs 8,35,44,963.39. You can withdraw up to Rs 5,01,26,978.03, while your annuity amount will be Rs 3,34,17,985.36. It means by delaying your corpus by 15 years, your retirement corpus will increase by Rs 6,35,44,963.39, or over 317 per cent.
NPS Retirement Corpus Calculation Chart
Chart Courtesy: Max Life Pension Fund Management
| Scenario | Corpus | Assumed growth at 10% (Rs.) | 60% Withdrawal | 40% corpus to buy an Annuity plan |
| (Rs.) | (Rs.) | (Rs.) | ||
| Normal Exit (@ 60 years) | 20,00,00,000 | NA | 1,20,00,000 | 80,00,000 |
| Annuity deferred till 63, and lump sum deferred till 75 | 20,00,00,000 | 2,66,20,000 | *5,01,26,978 | 1,06,48,000 |
| Continue NPS- Exit at 70 | 20,00,00,000 | 5,18,74,849.20 | 3,11,24,909.52 | 2,07,49,939.68 |
| Continue NPS- Exit at 75 | 20,00,00,000 | 8,35,44,963.39 | 5,01,26,978.03 | 3,34,17,985.36 |