The National Pension System (NPS) is a valuable platform for building a retirement fund with the potential for substantial returns. With a well-planned approach, investors can aim for a monthly pension exceeding Rs 2 lakh after two decades of investment. Inadequate retirement savings can lead to financial challenges in one's post-retirement years, emphasizing the importance of effective planning and diversifying investments, including pension schemes.
The NPS is among the prominent government-backed pension schemes, managed by the Pension Fund Regulatory and Development Authority (PFRDA). It is open to all Indian citizens aged 18 to 70 and currently offers annual returns between 9% and 12%. Taxpayers can benefit from tax advantages of up to Rs 2 lakh per year under specific sections of the Income Tax Act, 1961.
How Much You Need To Invest To Earn Rs 2 Lakh Pension Per Month Through National Pension Scheme?
Let's explore how a person can secure a monthly pension of Rs 2 lakh through NPS investments. If an individual initiates contribution to the NPS scheme at the age of 40, they will have a 20-year investment horizon, lasting until their retirement at age 60. To attain a post-retirement monthly pension of Rs 2 lakh, it is necessary to invest Rs 1,30,000 every month for two decades. The total investment over this period will amount to Rs 3.12 crore, and assuming an annual return of 10 per cent, the total gains will accumulate to Rs 6.83 crore. Consequently, the total corpus fund after 20 years will approach approximately Rs 10 crore.
Upon maturity of the NPS investment, if 60 per cent of the corpus is withdrawn as a lump sum, it would yield Rs 5.97 crore. The remaining 40 per cent of the retirement corpus, totalling Rs 3.98 crore, can be designated for the annuity option. With a 6 per cent annuity rate considered, this would translate to a monthly pension of Rs 1.99 lakh. Nevertheless, it is advisable to commence NPS investments at an earlier age, as this allows for the accumulation of a larger corpus through smaller contributions.
