National Pension System or NPS is one of the tools of retirement planning that an Indian can adopt to secure his financial future in his/her golden age, a time when a person is at the most vulnerable age.
Let us see how one can secure one’s future with regular and disciplined investments in NPS, a scheme launched on January 1, 2004.
One can begin NPS contribution at 18
Consider a young investor who was born on January 1, 2006. He/she is just 18 now and unlike an overwhelming number of members of that age group, starts to invest for retirement and opens an NPS account.
The parameters
Let’s also consider that a small amount of Rs 1,000 will be invested in the NPS.
The following are the investment parameters:
Investment continued till the age of 75 years. That means investment continues for 57 years.
The expectation of return on investment is a moderate 10%.
The investor would opt for annuity for 40% and the expectation of annuity will be at 6%.
NPS pension calculator
At the end of 57 years, NPS will give you a monthly pension of Rs 70,396.
On a total nominal contribution of Rs 684,000, you would build a total corpus of Rs 35,197,836 or Rs 3.51 crore. Therefore, the total gain the investor makes will be about Rs 34,513,836 or Rs 3.45 crore.
The rules state that one can withdraw 60% of the accumulated amount at the age of 60. The rest 40% will be maintained from which monthly pension will be paid.
The pension will begin at the age of 60.
If you begin NPS contribution at 24
Keeping all other parameters unchanged, just shift the date of birth of our investor to January 1, 2000, which means, he/she is 24 years and six months old now.
If he/she pays the same contribution of Rs 1,000 till he/she attains the age of 75, the monthly pension will fall drastically. It will become Rs 38,621 instead of Rs 70,396 which one can get by beginning just six years earlier.
The total corpus and the total gain will respectively be Rs 1,93,10,639 (Rs 1.93 crore) and Rs 1,86,98,639 (Rs 1.86 crore).
Another scenario
If one just raises the monthly contribution to NPS to Rs 2,000, the returns can rise stupendously.
If a 24-year-old begins to contribute Rs 2,000 a month and continues till he/she attains 75 years, the pension would rise to Rs 77,243.
The total corpus would come to Rs 3,86,21,278 (Rs 3.86 crore) and total gain Rs 3,73,97,278 (Rs 3.73 crore).
NPS Pension calculator: National Pension System can turn small monthly contributions into a major pool of funds. The only rider: one has to continue in a disciplined way for a very long period of time. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
