NPS Calculator: Everyone desires a stress-free life after retirement, where they have enough money to meet their needs and daily expenses.
To ensure a stable monthly income even after retirement, it is crucial to plan ahead. When starting a job or employment, it is advisable to begin planning for retirement as well. For individuals in the private sector, the National Pension System (NPS) is a great option for retirement planning. Not only does it help in building a substantial retirement fund, but it also provides the opportunity to receive a monthly pension. Moreover, NPS is considered as one of the most affordable pension products available.
NPS Calculator: Plan for a Monthly Pension of ₹1 Lakh
If your goal is to retire at the age of 60 and receive a monthly pension of Rs 1 lakh, considering the National Pension System (NPS) can be a wise decision. To achieve this, it is important to determine the required monthly investment amount. Let’s use the NPS Calculator provided by SBI Pension Fund to understand this better. Assuming you are currently 21 years old and plan to retire at 60, you have a total investment period of 39 years for your projected retirement planning. Here’s the calculation:
Monthly investment in NPS: ₹10,000
Total contribution over 39 years: ₹46.80 Lakh
Estimated Return on Investment: 10%
Maturity amount: ₹5.62 Crore
Annuity Purchase: 40% (₹2.25 Crore)
Estimated Annuity Rate: 6%
Monthly pension at age 60: ₹1,12,458
(Note: The above calculation is an approximation. Actual figures may vary.)
By opting for 40% annuity in NPS (which is the minimum requirement) and with an annuity rate of 6% per annum, you will receive a lump sum of Rs 3.37 crore and the remaining Rs 2.25 crore will be utilized to provide a monthly pension of approximately Rs 1 lakh after retirement.
Remember, the more you allocate towards the annuity, the higher your pension amount will be. The responsibility of managing the invested amount in NPS is entrusted to registered Pension Fund Managers by PFRDA. They invest your funds in equity, government securities, non-government securities, and fixed income instruments.
NPS: It is necessary to take 40% annuity
It is essential to purchase a minimum of 40% annuity under the NPS scheme. Annuity refers to a contract between you and an insurance company, where a certain percentage of the NPS amount is used to purchase an annuity. The annuity portion provides a regular pension after retirement, while the remaining NPS amount can be withdrawn as a lump sum.
Additionally, under Section 80CCD (1B) of the Income Tax Act, you can avail an additional tax deduction of up to Rs 50,000 on NPS investments, over and above the limit of Rs 1.5 lakh in Section 80C.
(Disclaimer: There is no guaranteed pension in NPS. The provided calculation and annuity returns are approximate. It is advisable to consult a financial advisor before making any investment decisions.)