“₹1 Lakh Pension Goal: NPS Monthly Investment Breakdown for 30-Year-Olds”

At age 30, an NPS subscriber needs to invest Rs 20,000 per month for 30 years to secure a pension of Rs 1 lakh per month after retirement, along with significant tax benefits.

NPS Calculator: The National Pension System (NPS) is one of the popular investment schemes that offer financial security and stability during old age as that is the time when retirees often lack a regular source of income. With life expectancy in India continuously increasing, it becomes more important for individuals to save for their golden years. NPS provides an opportunity for individuals to invest and accumulate savings, which, at the time of retirement, are disbursed as a lump sum and regular income through an annuity plan.

What is NPS and how it works?

The NPS was launched on January 1, 2004. Initially, NPS was implemented for new recruits in government service (excluding armed forces personnel). From May 1, 2009, it was extended on a voluntary basis to all citizens of the country, including workers in the unorganized sector.

Through the NPS, the government wants to meet the objective of providing retirement income to all citizens. The pension plan aims to introduce reforms and promote a culture of saving for retirement among citizens.

NPS offers the following key features:

Permanent Retirement Account Number (PRAN): Each subscriber is provided a unique PRAN, which remains valid throughout their lifetime and can be accessed from any location in India.

Two Account Types:

Tier 1 Account: A mandatory retirement savings account with restricted withdrawal options.

Tier 2 Account: A voluntary savings account that allows subscribers to withdraw their savings freely. However, no tax benefits are provided on this account.

NPS withdrawal:

A subscriber is allowed complete 100% lump sum withdrawal if the corpus is less than Rs 5 lakh. If the corpus is more than Rs 5 lakh, at least 40% of the accumulated amount has to be utilised for purchase of an annuity providing for monthly pension to the subscriber and the balance 60% can be withdrawn as lump sum.

How much do you need to invest per month to get a pension of Rs 1 lakh?

Here we will understand how much an individual needs to invest per month to get a pension of Rs 1 lakh after on retirement at the age of 60, considering the present age at 30.

Target pension per month – Rs 1 lakh

Present age of NPS subscriber – 30 years

To receive a pension of Rs 1 lakh by investing in an annuity after retirement, the individual must start investing Rs 30,000 per month and continue for 30 years.

After 30 years of investment, the NPS subscriber’s total corpus reaches Rs 4.56 crore assuming a reasonable annual return of 10%.

Total investment in 30 years – Rs 72 lakh

Return on investment – Rs 3.84 crore

Total value of investment – Rs 4.56 crore

Annuity invested (40%) – Rs 1.82 crore

Lump sum withdrawn – Rs 2.74 crore

Pension per month – Rs 1 lakh (Expected return of annuity 6%).

Tax benefits for NPS subscribers:

NPS investments are eligible for tax benefits under Section 80CCD(1) within the overall limit of Rs 1.5 lakh as specified under Section 80CCE. Additionally, NPS subscribers can claim an exclusive deduction of up to Rs 50,000 for investments in their Tier I account under Section 80CCD(1B).

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This blog is purely for educational purposes. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.