NPS: The National Pension Scheme (NPS) serves as an excellent retirement solution for all Indian citizens, catering to individuals aged 18 to 70. This scheme is accessible to government employees, private sector workers, and NRIs alike, making it a straightforward and effective way to ensure financial security in the future. The primary objective of NPS is to provide a consistent monthly pension along with a substantial lump sum upon retirement, thereby promoting financial independence in later years.
For example, let assume a person, who is 40 years old and has opted for NPS as part of his retirement strategy. With guidance from a financial advisor, he plans to invest Rs 20,000 each month for 20 years. By the time he reaches 60, he anticipates accumulating a lump sum of Rs 1.62 crore and receiving a monthly pension of approximately Rs 1 lakh. NPS not only offers competitive returns but also facilitates tax savings.
Planning for NPS at the age of 40 (or 20 years of investment) involves the following steps:
– Starting age for investment: 40 years
– Duration of investment: 20 years (until age 60)
– Monthly contribution: Rs 20,000
– Annual top-up investment: 10%
– Total investment over 20 years: Rs 1,37,46,000
– Expected annual return: 10%
– Total corpus at retirement: Rs 3,22,90,815 (approximately Rs 3.23 crore)
– Total profit: Rs 1,85,44,815 (around Rs 1.85 crore)
– Total tax savings: Rs 41,23,800
Upon retirement, the expected benefits include:
– Lump sum withdrawal: Rs 1,61,45,407 (approximately Rs 1.62 crore)
– Investment in annuity: Rs 1,61,45,408 (55% of the corpus)
– Monthly pension: Rs 1,07,636 (around Rs 1 lakh).
If you’re 40 and feeling anxious about retirement, consider the NPS as a fantastic choice. With a well-thought-out plan in place, you can set the stage for a secure and promising future.
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