Are you wondering how to secure a monthly pension of Rs 1 lakh through the National Pension System (NPS)? NPS stands out as a reliable avenue for enhancing your retirement income while benefiting from tax savings.
Overview of NPS
The scheme is open to all Indian citizens aged 18 to 70, including non-resident Indians. NPS offers a structured approach to financial security in retirement. NPS, overseen by the Ministry of Finance and regulated by the Pension Fund Regulatory and Development Authority (PFRDA), provides a disciplined platform for retirement planning through systematic savings.
Tax Benefits of NPS
Under NPS, individuals can avail of tax benefits, with contributions falling under various sections of the Income Tax Act. For instance, one can save up to Rs 1.5 lakh under Section 80C, an additional Rs 50,000 under Section 80CCD(1B), and employer contributions under Section 80CCD(2).
Planning for a Rs 1 Lakh Monthly Pension
Achieving a monthly pension of Rs 1 lakh through NPS requires careful planning, considering factors such as age, contribution amount, expected returns, and annuity options. Let’s see how an investor can accumulate this pension amount.
Strategy for Accumulating Rs 1 Lakh Pension
Starting early is key. By initiating NPS investments at a young age, individuals can capitalize on market-linked returns and compound interest. Assuming a minimum annualized average return of 7%, let’s explore how a 25-year-old can secure a monthly pension of Rs 1 lakh by the age of 60.
Calculation Breakdown
Here’s a breakdown of the calculations:
- Age: 25 years
- Retirement age: 60 years
- Total contribution period: 35 years
- Expected return: 7%
- Annuity purchase: 80%
- Total Investment required: Rs 39,54,000
- Total Corpus at retirement: Rs 1,59,24,619
- Total Gain: Rs 1,19,70,619
Check: NPS Calculator
Investment Requirement
To generate an expected monthly pension of Rs 1,00,000, one would need to invest Rs 10,042 per month. This translates to an annual investment of Rs 1,20,504, or approximately Rs 334.6 per day.
In summary, NPS offers a reliable pathway to securing a substantial pension for retirement. By leveraging its benefits and starting early, individuals can build a strong financial foundation for their post-retirement years.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
