NPS: How delaying your retirement by 5 years can give you 67% more monthly pension
NPS Monthly Pension: National Pension System (NPS) is a retirement pension scheme, where one can contribute up to the age of 70. At retirement, one gets a lump sum amount and the monthly pension. The scheme also provides tax benefits of up to a maximum of Rs 2 lakh under Section 80C and 80CCD (1B) of the Income Tac Act, 1961.
Retirement Planning: National Pension System (NPS) is a market-linked retirement scheme, where you contribute from the age of 18 to 70. At retirement, you get a lump sum and a monthly pension. You can withdraw a maximum of 60% of your corpus and have to purchase annuities to get a monthly pension from the remaining 40%. A monthly contribution of Rs 10,000 starting at 25 years of age can help you accumulate 3,82,82,768 at the retirement age of 60, even if you get a 10 per cent return on your investments. But if you delay your retirement by five years and keep contributing until you reach 65, you can increase your corpus and monthly pension by 67%. Know how!
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Rs 10,000 monthly investment in NPS
You need to make a Rs 10,000 monthly contribution to NPS starting at age 25 and need to keep contributing till age 60.
10% return on NPS contributions
If you get a 10% compound return on your NPS contribution, then in 35 years, or at the age of 60, your total investment will be Rs 42,00,000, your total gain will be Rs 3,40,82,768 and your total corpus will be Rs 3,82,82,768.
60% NPS corpus withdrawal at retirement
If you withdraw 60% of your corpus at retirement, or Rs 2,29,69,661, you will purchase annuities for Rs 1,53,13,107 to get a monthly pension.
NPS monthly pension
If you invest Rs 1,53,13,107 in an annuity plan and get a six per cent return on it, you will get a monthly pension of Rs 76,566.
What if you extend NPS contributions for 5 more years?
If you keep investing Rs 10,000 monthly for five more years and keep getting 10% compound returns, your total investment will be Rs 48,00,000, your total gains will be Rs 5,89,67,803, and your total corpus will be Rs 6,37,67,803. In this way, your corpus will be nearly 67% higher than your corpus at 60 years of age.
60% NPS corpus withdrawal at retirement
If you withdraw a 60% lump sum, its value will be Rs 3,82,60,682, and the annuity value will be Rs 2,55,07,121.
NPS monthly pension
A Rs 2,55,07,121 annuity will help you get a monthly pension of Rs 1,27,536, which is nearly 67% more than the pension you would get at 60 years of age.
NPS Pension
(Disclaimer: This calculation is for knowledge purposes only. Do you due diligence or consult an expert to plan your retirement.)