The National Pension System or NPS which was launched on the first day of 2004 is a great wealth builder for the common man above 18. The beauty of the scheme is that one can use it to create considerable asset in the name of one’s spouse too – an asset that can not only sustain her/him in advanced age but also improve the asset base of the entire family.
Consider a simple case that involves investing a small amount in your spouse’s NPS account.
NPS Calculator
Suppose you were born on January 1, 1994, which makes you 30 years old. You open an NPS account in the name of your spouse and invest Rs 2,500 every month in it.
The assumptions are as follows: you would continue investing till she/he attains 75 years of age, which means you would invest this amount for 45 years.
It would generate a modest return of 10%.
According to the rules of NPS your can withdraw 60% of the lumpsum at 60.
The rest 40% will be kept with NPS which will start paying a pension every month from 60 years. The return expected for the pension part is 6%.
The arithmetic
When your spouse turns 60, the NPS would start paying her/him a monthly pension of nothing less than Rs 52,849.
The total corpus that is generated by NPS is Rs 2.64 crore. Remember you have invested only Rs 13.50 lakh over 45 years.
Therefore, your total gain stands at Rs 2.50 crore – or nearly 20 times of your nominal investment.
Compounding over very long periods
The NPS takes advantage of the power of compounding over a very long period of time.
The only thing required on the part of the investor is the doggedness to keep investing every month over decades.
Coming to the execution point, it is really easy since it amount is debited from your bank account automatically every month and you need not remember it separately. One just has to ensure that sufficient money is in the bank account for the auto-debit.
However, one should consult a qualified financial advisor before investing one’s hard-earned money in any scheme.
The National Pension System is a great wealth builder. You can also do it for your spouse as well as generate family wealth. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
