NPS Best Retirement Investment Scheme: There are many people working in private companies who fail to plan their pension, even if they have a huge salary package. National Pension System (NPS) is a government investment scheme for retirement. This scheme has been designed for pension after retirement. But the subscriber base in NPS private sector is less than 60 lakhs. But as retirement approaches, the tension regarding regular income in non-working years increases.
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Mahesh is also in similar tension who is now about to turn 40 and is due to retire at the age of 60. Currently his salary is around Rs 1.50 lakh per month. But till now he has not planned anything for retirement. Due to these things, they have started worrying about where the money will come from for regular expenses after 20 years. If you plan for 20 years, you can get a pension of Rs 1 lakh. Let us know from NPS calculator whether planning for 20 years will provide a pension of Rs 1 lakh or not. And at what age would it be best to join NPS?
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NPS: How to plan at the age of 40
Age to start investing: 40 years
Investment period: 20 years (up to 60 years of age)
Investment in NPS every month: Rs 20,000
Top up in investment after every year: 10%
Your total investment in 20 years: Rs 1,37,46,000
Estimated return on investment: 10% per annum
Total corpus: Rs 3,22,90,815 (Rs 3.23 crore)
Total Profit: Rs 1,85,44,815 (Rs 1.85 crore)
Total tax saving: Rs 41,23,800
Now you will have to buy annuity for pension
Investment of pension wealth in annuity plan: 55%
Annuity Rate: 8%
Pension Wealth: Rs 1,61,45,408 (Rs 1.62 crore)
Lump Sum Withdrawal Amount: Rs 1,61,45,407 (Rs 1.62 crore)
Monthly Pension: Rs 1,07,636 (approximately Rs 1 lakh)
By investing with this strategy, you will get a lump sum fund of Rs 1.62 crore when you retire at the age of 60. At the same time, pension of about Rs 1 lakh will start getting every month.
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At what age is it best to join NPS?
Talking about subscribers working in non-government sector, by taking LC 75, LC 50 and LC 25 options, those till the age of 35 years get more exposure to equities. This exposure can be up to 75 percent. Whereas in Active Choice, 75 percent exposure is available in equity till the age of 50. At the same time, by the age of 60, this exposure reduces from 5 percent to 50 percent. Therefore, if you join it till the age of 35, then you can get more benefits on retirement by doing proper investment planning.
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However, exposure to equity stabilizes the risk-return equation in the interest of investors, which means the corpus is protected to some extent from equity market volatility. But still, there is some risk due to equity asset class being in the portfolio. But it has higher earning potential compared to other fixed income schemes. Apart from equity, money is invested in NPS in corporate bonds and government bonds.
Withdrawal rules after retirement
Currently, one can withdraw up to 60 per cent of the total corpus as a lump sum, with the remaining 40 per cent going into an annuity plan. Under the new NPS guidelines, if the total corpus is Rs 5 lakh or less, subscribers can withdraw the entire amount without purchasing an annuity plan. These withdrawals are also tax-free.
(Source: NPS Trust, NPS Calculator)
