NPS Retirement Corpus and Monthly Pension
The National Pension System (NPS) is a reliable retirement planning tool, especially for those starting early. For a 25-year-old with no current investments, aiming to retire at 60, a disciplined monthly contribution of Rs 15,000 can yield substantial results.
With an expected return rate of 10% on NPS investments and assuming 40% of the pension wealth is invested in an annuity with a 6% return, the goal of a Rs 5 crore corpus and a Rs 1.46 lakh monthly pension is attainable.
Key Assumptions:
- Current Age 25
- Retirement Age 60
- Monthly ContributionRs 15,000
- Expected Return on Investment 10%
- Percentage of Pension Wealth in Annuity 40%
- Expected Annuity Rate of Return 6%
- Expected Terminal Age 80
Results:
By following this plan, the individual can accumulate a corpus of approximately Rs 5 crore by the age of 60. Upon retirement, 40% of this corpus, which is Rs 2 crore, will be invested in an annuity. With an expected annuity rate of 6%, this will provide a monthly pension of around Rs 1.46 lakh.
NPS Tax Benefits
NPS offers significant tax benefits to its contributors, enhancing its attractiveness as a retirement planning tool. According to the NPS official website, Tier I account holders can avail a tax deduction of up to 10% of their salary (basic + dearness allowance) under Section 80 CCD(1) within the overall ceiling of Rs 1.50 lakh under Section 80 CCE.
Additionally, an extra tax deduction of up to Rs 50,000 under Section 80 CCD(1B) is available, over and above the overall ceiling of Rs 1.50 lakh under Section 80 CCE.
Expert View
Experts suggest that starting early and maintaining a disciplined approach to monthly contributions are crucial for building a substantial retirement corpus through NPS. Regular investments, coupled with the power of compounding and tax benefits, make NPS an effective strategy for securing a financially stable retirement.
In conclusion,
the NPS is a robust framework for those aiming to build a significant retirement corpus and secure a steady monthly pension. By adhering to the outlined plan and leveraging the tax benefits, one can achieve the desired financial goals and enjoy a comfortable retirement.
