For the ordinary middle class, savings and correct investment are the tools for a secured retired life. Among several options for retirement, the National Pension Scheme started by the government is a great option for those people who want to go for traditional method of investment.
You can start saving a very little amount in National Pension System (NPS) and over a period of time, earn good benefits too.
Assuming, a person starts at a very early age (say a person who is 20 years old) and sets aside just Rs 74 per day and put it in the National Pension System , then the person can easily build a corpus of Rs 1 crore. Here is an assumptive plan for building the retirement corpus of Rs 1 crore. If a person starts at the age of 20 and invests Rs 74 per day (Rs 2230 per month), upon retirement (after 40 years) the person can build a total corpus of Rs 1.03 crore, at 9 percent rate of interest.
Check out this calculation:
Start of investment in NPS
Age: 20 years
Investment Rs 2230 per month
Investment Period 40 years
Estimated Return 9%
NPS bookkeeping records
Total invested 10.7 lakh rupees
Total Interest received Rs 92.40 Crore
Pension wealth 1.03 crores
Total tax saving Rs 3.21 lakh
You cannot withdraw the entire money at once, but only 60 percent of it. You will have to put the remaining 40 percent in an annuity plan, so that you get a pension every month. Suppose you put 40% of your money in annuity. So when you are 60 years old, you will be able to withdraw a lump sum of Rs 61.86 lakh and assuming that the interest is 8 percent, then every month pension will get around Rs 27500.
Pension account estimate
Annuity 40 percent
Estimated interest rate 8%
Lump sum amount of Rs 61.86 crore
Monthly pension Rs 27496
Since this is a market-linked product, the rate of returns may change in due course of time. Keep in mind that the mantra of any investment lies in investing at an early age
(Disclaimer: This is an assumptive calculation and in no manner intended to be of any financial advice. For further clarity you can check with your portfolio manager)
