Best Pension Scheme: Suresh, who works in a private company, is going to turn 40 in January 2025. He is due to retire at the age of 60. Currently his salary is around Rs 1.25 lakh per month. But till now he has not planned anything for retirement, whereas his friends were alert about retirement from an early age and started investing for it. Now, Suresh is worried about these things as to where the money for regular expenses will come from after 20 years.
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NPS: Will remove pension tension
When Suresh talked to a financial advisor, he came to know that 20 years from now, the way inflation is increasing, the expenses will also increase accordingly. Therefore, at least during that period, there will be a need for a regular monthly income of Rs 1 lakh, so that the funds received after retirement can be saved and the basic needs can be met. The same financial advisor advised him to invest in the National Pension System i.e. NPS. He told how 20 years is enough time for better planning. Also showed the calculation that by planning for 20 years, he can arrange a pension of Rs 1 lakh and also a fund of at least Rs 1.50 crore.
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NPS: What is this pension scheme?
National Pension System (NPS) is an investment scheme. This scheme has been designed for pension after retirement. It is being regulated by PFRDA or Pension Fund Regulatory and Development Authority under the PFRDA Act 2013. Under NPS, investors’ savings are deposited in the pension fund.
Any Indian citizen (government employee or private sector employee) between the age of 18 years to 70 years can open an account in NPS. NRIs are also eligible for this. After opening the account, one has to contribute till the age of 60 years or till maturity. It requires investment for at least 20 years.
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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.
(Source: SBI Pension Fund Calculator)
Rules of Investing: Money will double in less than 5 years, triple in less than 8 years, this formula will explain where to invest.
