Retirement Planning: Invest Rs.3500 in NPS per month and get Rs.40,000 pension

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Retirement planning is a crucial aspect of making sound financial decisions. As time goes by, the cost of living increases due to inflation, making it necessary to reassess relying solely on savings during retirement.

Achieving Financial Freedom in Post-Retirement Life

To attain financial freedom during your post-retirement years, it is essential to invest in a retirement plan that provides a regular income once you reach retirement age. One of the most effective tools in the country for meeting this requirement is the National Pension Scheme (NPS). The NPS offers the advantage of receiving a lump sum at retirement age, followed by a regular monthly income.

The Benefits of Compound Returns with NPS

The NPS provides compounding returns, meaning that the longer your investment period, the faster your income will grow. For example, if you start investing in NPS in your early 20s, you will have a longer time frame to invest. Even smaller investments made during this period can help you build a significant corpus by the time you retire.

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A Case Study: Investing in NPS

Let’s consider a scenario where an individual starts investing Rs 3,475 per month in NPS at the age of 21 and continues investing for the next 39 years until retirement at the age of 60.

  • Age: 21 years
  • Retirement age: 60
  • Monthly contribution: Rs 3,475

By following this investment strategy, the individual will accumulate a total corpus of Rs 2,00,19,029.

Withdrawal Options and Annuity Calculation

At retirement age, it is possible to withdraw a lump sum of up to 60% from the accumulated corpus. In this case, the individual would be left with an annuity of 40%.

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The government invests annuities in debt funds or corporate bonds, generating a fixed income. Assuming a six percent return on the annuity:

  • The amount invested in the annuity would be Rs 80,07,612.
  • The expected monthly pension would amount to Rs 40,038.
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