National Pension Scheme: Even though it is dependent on market performance, the well-known government programme known as the National Pension System (NPS) presents a great opportunity for retirement savings. You may ensure a consistent monthly income during your golden years and accumulate a sizeable retirement savings with NPS.
NPS has two types of accounts: Tier 1 and Tier 2. While anyone can open a Tier 1 account, a Tier 2 account is available only if you have an active Tier 1 account.
Lump Sum and Annuity Options
You can cash out a lump sum withdrawal of 60% of your entire NPS investment when you turn 60. You must use the remaining 40% to buy an annuity, which gives you a fixed pension.
Investing in NPS for a Monthly Pension Over Rs 40,000
If you’re considering investing in NPS, here’s how you can secure a monthly pension of more than Rs 40,000:
- Starting Early: Begin investing in NPS at the age of 33.
- Investment Duration: Continue investing in the scheme for 27 years, up to the age of 60.
- Monthly Contribution: Invest a minimum of Rs 10,000 each month.
According to the NPS calculator, a monthly investment of Rs 10,000 for 27 years will total Rs 32,40,000. Assuming an annual interest rate of 10%, this will grow to Rs 1,65,94,166 by the time you turn 60.
Breakdown of Your NPS Fund
- Total Investment: Rs 32,40,000
- Interest Earned: Rs 1,33,54,166
- Total Amount at Age 60: Rs 1,65,94,166
When you retire, you can withdraw 60% of this amount as a lump sum, which will be Rs 99,56,500. The remaining 40%, which is Rs 66,37,666, will be used to buy an annuity.
Monthly Pension Calculation
If the annuity earns an 8% return, you will receive a monthly pension of Rs 44,251.
A wise strategy to guarantee financial stability in retirement is to invest in NPS. You can have a worry-free retirement with a sizeable lump payment and a reasonable pension by starting early and investing regularly.
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