NPS Calculator: How to Secure a Monthly Pension of Rs 2 Lakh After Retirement? – Money News

NPS calculator: An old-age pension provides a reliable source of income during retirement, when people are no longer actively earning or are earning less. For private sector workers, an old-age pension is a valuable benefit because it gives them access to programs that guarantee a steady income after they retire.

The National Pension System (NPS) is one such option that supports retirement savings. This system promotes financial security by encouraging individuals to save regularly and invest for the long term.

Also read: Best Fixed Deposits for Seniors in November – Check Latest Interest Rates

To calculate how much a 25-year-old should invest through NPS for a monthly pension of Rs 2 lakh, we need to consider the following factors:

1. Investment period: 35 years (from 25 years to 60 years).

2. Expected return: approximately 12% per year during the accumulation phase.

3. Annuity: approximately 6% at the time of retirement.

4. Annuity purchase: NPS prescribes that at least 40% of the corpus be used to purchase an annuity for regular retirement.

Example:

If a 25-year-old starts contributing Rs 15,500 per month to NPS and invests consistently till the age of 60, his retirement savings could grow significantly. Assuming a 12% annual return on his investments, his accumulated corpus will be significant by the time you retire. Based on these projections, his monthly pension could be around Rs 2 lakh, providing a stable and reliable income for the retirement years.

This calculation works as follows:

Your age: 25 years

Monthly investment: 15,500

Investment period: 35 years

Expected return on investment: 12%

Percentage of the corpus intended for pension: 40%

Expected return from pension: 6%

Total investment: Rs 65.1 lakh

Revenue earned: Rs 9.42 crore

Maturity Amount: Rs 10.1 cr

Lump sum (60%) at age 60: Rs 6.04 cr

Retirement wealth (40%) at age 60 – Rs 4.03 cr

Monthly pension: Rs 2,01,353

How much should a 30-year-old person invest to get a monthly pension of Rs 2 lakh?

Your age: 30 years

Monthly investment: 28,500

Investment period: 30 years

Expected return on investment: 12%

Percentage of the corpus intended for pension: 40%

Expected return from pension: 6%

Total investment: Rs 1.03 crore

Revenues Earned: Rs 9.03 cr

Maturity Amount: Rs 10.1 cr

Lump sum (60%) at age 60: Rs 6.04 cr

Retirement wealth (40%) at age 60 – Rs 4.02 cr

Monthly pension: Rs 2,01,205

So, a 30-year-old has to invest Rs 28,500 to get a monthly pension of around Rs 2 lakh.

However, this estimate is contingent on maintaining consistent contributions and achieving assumed returns, highlighting the NPS’s potential as a powerful long-term retirement planning tool.

Types of NPS accounts:

• Tier-I account: This is a mandatory permanent retirement account into which contributions from both the subscriber and his employer are deposited and invested as per the chosen fund or scheme.
• Level II account: This is a voluntary withdrawable account, available only if you have an active Tier-I account. You can withdraw money from this account if necessary.

Tax benefits for employees:

Employees who contribute to the NPS are eligible for the following tax deductions from their personal contributions:

1. Section 80 CCD(1): A deduction of up to 10% of salary (Basic + DA), within the overall limit of Rs 1.5 lakh under Section 80C.
2. Section 80 CCD(1B): An additional deduction of up to Rs 50,000, over and above the ceiling of Rs 1.5 lakh under Section 80 CCE.

Thus, an NPS calculator serves as a crucial tool for individuals who want to strategically plan their retirement. Using a National Pension System calculator allows you to easily project your future pension and total corpus, taking into account your contributions and the duration of your investment.

When planning your retirement, an important aspect to consider is assessing your current and future expenses. This allows you to determine how much income you need when you retire. This way you can be sure that your pension scheme matches your financial objectives.