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National Pension System (NPS) proves to be very helpful in retirement planning for private sector employees. By starting investing in NPS early, a good fund can be accumulated for retirement and a good monthly pension can be arranged. Although investing in NPS does not guarantee you a fixed pension, but by investing in it early and wisely, you can make your retirement comfortable. Your pension depends on the annuity scheme you choose and the returns you get on it.
Today we will tell you that if you are 25 years old, then how much investment will be required to get a monthly pension of about Rs 1.5 lakh and a retirement fund of about Rs 4.54 crore after 35 years.
How does NPS investment work? (NPS Investment)
Under NPS, you must use at least 40% of your corpus to buy an annuity from an annuity service provider (ASP) regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The remaining 60% of your corpus can be withdrawn as a lump sum tax-free.
There are two types of accounts in NPS: Tier 1 and Tier 2. Tier 1 is your pension account, while Tier 2 is a voluntary savings account. You must have a Tier 1 account to open a Tier 2 account. Remember that tax benefits are available only on Tier 1 contributions.
Tax exemption on investment in NPS
Apart from the tax exemption on investments up to Rs 1.5 lakh under Section 80C, you can also claim tax exemption on annual investments up to Rs 50,000 in this scheme under Section 80CCD (1B). Apart from this, 60% of the maturity amount withdrawn from NPS is tax-free.
Invest in NPS and get Rs 1.5 lakh monthly pension
Let us know how much a 25-year-old should invest in NPS every month to get a monthly pension of Rs 1.5 lakh by the age of 60. We will also know how these investments can help in building a retirement fund of Rs 4.54 crore. If you start investing in NPS at the age of 25 and aim to get a monthly pension of around Rs 1.5 lakh by the age of 60, then here is what you need to know:
Investment Details:
- You will have to invest this much every month: To achieve the target of monthly pension of Rs 1.5 lakh, you will have to invest Rs 7,000 every month.
- Return on Investment: Assuming a 12% annual return, your investment will grow year after year.
- Total Investment: During this period you will invest a total of Rs 29,40,000.
- Total Maturity Value: By the time you retire, your total corpus would be around Rs 4.54 crore.
Distribution of Maturity Value:
- Reinvestment of Annuity: Out of the total amount, around Rs 1.82 crore will be used to buy annuity.
- Lumpsum withdrawal: You can withdraw up to Rs 2.72 crore in one go.
- Pension: This way you can expect to get a monthly pension of more than Rs 1.50 lakh.
