NPS: Want Rs 2 lakh pension per month after retirement? Here's how much you need to invest in NPS
The National Pension System (NPS) offers significant returns and it is beneficial for building a retirement corpus. With a strategic plan an investor can get a monthly pension of over Rs 2 lakh after 20 years of investment.
Managing expenses could become a little tricky after retirement if you haven't saved enough for your golden years. However, efficient planning can lead to building a significant retirement corpus. For this, you need to invest in various investment options as well as pension schemes.
There are many government-backed pension schemes which offer a stable income and offer retirement benefits. One of the most popular pension schemes is the National Pension System (NPS), which is managed by Pension Fund Regulatory and Development Authority (PFRDA).
What is the National Pension System (NPS)?
The National Pension System (NPS) refers to the voluntary savings scheme that is available to all citizens of India. Launched in 2004, the scheme was originally available to government employees but then it was opened for all citizens aged between 18 and 70 years. Currently, NPS investments offer 9-12 per cent return per annum. Tax benefits up to Rs 2 lakh per annum can be claimed under Sections 80 CCD(1) and 80 CCD 1(B) of the Income Tax Act, 1961.
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How to earn Rs 2 lakh pension per month with NPS investment?
Now, let’s understand how to earn Rs 2 lakh monthly pension through NPS investments. If an individual starts to contribute to the NPS scheme at the age of 40, then the tenure for the investment will be 20 years until the retirement age of 60. Therefore, in order to get a monthly pension of Rs 2 lakh after retirement, you need to invest Rs 1,30,000 every month for 20 years. Your total investment will be Rs 3.12 crore and assuming an annual return of 10 per cent, the total gains will amount to Rs 6.83 crore. Therefore, your total corpus fund after 20 years would be nearly 10 crore.
After maturity of the NPS investment, if you withdraw 60 per cent of the corpus as a lump sum amount, it would be Rs 5.97 crore. The remaining 40 per cent of the retirement corpus, Rs 3.98 crore will be available for the annuity option. Therefore, if you consider a 6 per cent annuity rate, you will receive a monthly pension of Rs 1.99 lakh. However, it is advisable to start investing in NPS at an early age to build a higher corpus via smaller contributions.