Most investment instruments play out its full potential to generate returns in the long term. Recently NPS Vatsalya has been in the news because the government extended it so that parents can start an account for a minor that can ideally continue till his/her retirement to build a massive sum for advanced years.
However, in real life most of us are not so financially prudent. Most would not start investing for their retirement before they hit the forties. Let’s see how what amount one needs to invest after turning 40 to ensure a pension of Rs 1 lakh a month.
Rs 44k a month
One can use the NPS calculator to find out how one can try to salvage the situation by beginning to invest in NPS even after reaching 40. It is seen that if one opens an NPS account at the age of 40 and starts contributing every month, one can be entitled to a monthly pension of Rs 1 lakh by investing Rs 44,000 a month.
The assumption is that one would buy annuity with 60% of the accumulated funds and a 6% return will be applicable on the annuity. This calculation is based on the assumption that this person would start investing at 40 years and end at 60 years.
Rs 50k a month
With these assumptions unaltered, if one raises the monthly investment to Rs 50,000, the monthly pension will reach Rs 1,14,855.
Another important point is that apart from pension one would also get a lumpsum at the age of 60 years, when the pension would begin. Also note that the template return in these calculators is 10%. If the returns rise above this level, which is likely, say experts, the lump sum as well as the pension payable will rise in tandem.
NPS is a government-backed retirement scheme that spices up the offer with income tax benefits. It is regulated by the insurance regulator PFRDA (Pension Fund Regulatory And Development Authority). An investor can select a bouquet of debt and equity instruments in which to invest his/her contributions.
The National Pension System, or NPS, is a cost-effective investment scheme that offers flexibility to the contributor to suit his risk appetite. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
