National Pension System (NPS) is a popular government scheme designed to secure the old age of people. Through this market-linked scheme, you can accumulate a good retirement fund and also arrange for regular pension after retirement. If you invest ₹5000 every month in this scheme at the age of 35 years, then how much retirement fund and pension will you get at the age of 60 years? Let’s understand.
What is NPS?
NPS is a market-linked scheme, which means whatever you invest in it, its return is determined according to the market. This scheme has two types of accounts: Tier 1 and Tier 2. Anyone can open a Tier 1 account, but a Tier 2 account can be opened only if you have a Tier 1 account.
• You can withdraw up to 60% of the money as a lump sum after 60 years, which will be your retirement fund in a way.
• You have to invest 40% of the money as annuity, which you get in the form of pension. How much pension you will get is decided according to your annuity.
How much money will be made by investing ₹5000 per month?
If you invest ₹5000 every month at the age of 35 years as per Balanced Lifecycle Fund and invest for 60 years, then you will have to invest for a total of 25 years.
• Total investment: ₹15,00,000
• Interest on 10% return: ₹47,17,573
• Total corpus: ₹62,17,573
How will the lump sum and pension be formed?
• 40% annuity investment: ₹24,87,029
• Lump sum retirement fund: ₹37,30,544
If you get 7% return on annuity, you will get ₹14,508 pension every month.
How much corpus will be created if you do 5% top-up?
If you do 5% top-up every year with ₹5000, your total investment till 60 years will be ₹28,63,626.
• Interest on 10% return: ₹65,52,837
• Total corpus: ₹94,16,463
How much retirement fund and pension will be available
• 60% retirement fund: ₹56,49,878
• 40% annuity investment: ₹37,66,585
On 7% annuity return, you will get ₹21,972 pension every month.
What is Balanced Lifecycle Fund?
Balanced Lifecycle Fund (BLC) invests in three major categories:
1. Equity
2. Corporate bonds
3. Government bonds
In BLC, 50% investment is done in equity for 45 years. After this, the share of equity gradually decreases as the age of the subscriber increases. By the age of 55, equity investment comes down to 35%, and more focus is on safe investments like government bonds.
NPS is a safe and beneficial scheme that helps you to give a strong financial backup for retirement. If you start investing on time, you can make your old age stress-free!
