Invest Rs 5,000 monthly and get pension of more than Rs 1 lakh, see calculation here

NPS: The National Pension System (NPS) is a market-linked retirement scheme, where one can make monthly contributions and receive a lump sum amount and thereafter receive a monthly pension. If one starts early, even a small monthly contribution can help him get a large monthly pension. One can start contributing to NPS from the age of 18 and continue it till the age of 70. NPS offers Tier-I and Tier-II accounts. In a Tier-I account, the lock-in period is 60 years of age. On retirement, one can withdraw up to 60 per cent of the lump sum amount, and the remaining 40 per cent of the amount must be spent on buying an annuity to receive a monthly pension. If a person wishes, he can buy an annuity for 100 per cent of his retirement amount.

Under certain conditions, one can withdraw his amount before the age of 60. The benefit of investing in a Tier-I NPS account is that one gets a tax exemption of up to Rs 1.50 lakh in a financial year under Section 80C of the Income Tax Act and an additional exemption of Rs 50,000 under Section 80CCD. Tier-II accounts are like any other account where one can withdraw money at any time. However, one does not get tax exemption in a Tier-II account.

In this article, we will tell you how a monthly contribution of Rs 5,000 can help you get a monthly pension of around Rs 96,000 after retirement.

For this, you have to start at the age of 25. If you deposit Rs 5,000 every month in your NPS account and get 10 percent return on your investment. At the age of 60, your total investment will be Rs 21 lakh and the estimated corpus will be Rs 1,91,41,384.

At age 60, you have two options. Either you can withdraw up to 60 per cent of your retirement corpus, or buy an annuity for the entire amount to get a monthly pension.

The advantage of buying annuities with 100 per cent funding is that you will get a higher monthly pension.

If you buy annuities with a corpus of Rs 1,91,41,384 and get a 6 per cent return on it, you will get a monthly pension of Rs 95,707.

How can you get Rs.100,000 pension?

For this, you have to start one year in advance and invest in NPS for another year. Keeping in mind the conditions mentioned above, your retirement amount will be Rs 2,12,09,088. If you buy an annuity for the entire amount, you can get a monthly pension of Rs 1,06,045.