The National Pension System (NPS) is a reliable way to build a substantial retirement corpus. By opening an NPS account in your wife’s name and investing regularly, you can ensure financial security for your family’s future.
Open NPS Account in the Name of Your Wife
To begin, open an NPS account in your wife’s name. Suppose she is currently 30 years old. By depositing Rs 5000 every month into this account, you will be making an annual investment of Rs 60,000. Continue this investment consistently for 30 years. The total investment over this period will be Rs 18 lakh. However, the returns from this investment are where the real benefits lie.
How Will You Make Money from NPS?
With a regular monthly investment of Rs 5000, at the end of 30 years, the total amount accumulated in the NPS account will be Rs 1,76,49,569. This impressive sum is due to the power of compounding at an estimated annual return rate of 12%. Out of this total, Rs 1,05,89,741 will be generated from interest alone.
Understanding the Pension Formula
Upon maturity of the NPS account at age 60, your wife will receive Rs 1,05,89,741 in a lump sum. This amount is the accumulated interest over the investment period. The remaining Rs 70,59,828, which is 40% of the total corpus, will be invested in an annuity plan to provide a regular pension.
The calculations are based on using HDFC Pension’s NPS calculator, which assumes the following:
- Age 30 years
- Total investment period 30 years
- Monthly contributionRs 5,000
- Estimated return on investment 12%
- Total pension fund on maturity Rs 1,76,49,569
- Annuity plan investmentRs 70,59,828 (40% of total)
- Estimated annuity rate 8%
Monthly Pension Calculation
Investing Rs 70,59,828 in an annuity plan with an estimated rate of 8% will yield a monthly pension of approximately Rs 47,066. This regular pension, combined with the lump sum amount received at maturity, provides significant financial security in retirement.
By strategically investing in the NPS, you not only build a substantial retirement corpus but also secure a steady income stream for the future.
