New Delhi: More than two decades have passed since the government pension ended. Now whether it is a government employee or a private employee, everyone is dependent on NPS for pension.
The good thing is that you can contribute to NPS according to your needs so that your corpus can increase. When the corpus increases, the pension amount will also increase. Now you can open NPS accounts for children as well. NPS Vatsalya Yojana has been started for them.
Looking at the rate at which inflation is increasing, it can be said that in the coming days, at least one lakh rupees will be required to run the household expenses every month. It has become very important to arrange money from now to run your own expenses after retirement. If you want to get a pension of Rs 1 lakh every month after retirement, then you have to invest wisely from now itself.
Where will I get my pension from?
National Pension System or NPS is one such effective method, which is capable of getting you adequate pension after retirement. But for this you have to plan and invest from now itself. Many people asked us how much money should be invested in NPS from now itself so that after retirement at least one lakh rupees can be received every month. Suppose Shriram is currently 40 years old. How much should he invest in NPS every month so that he can get this much amount every month after retirement?
Why only NPS?
Here the question arises that why should we rely only on NPS for pension? How does it work? You should know that NPS is a long-term savings scheme which is run by the Central Government. It is controlled by the Pension Fund Regulatory and Development Authority (PFRDA). It has two types of accounts – Tier-I, which is a mandatory pension account, and Tier-II, which is a voluntary savings account. Investments made in Tier-I account cannot be withdrawn till the age of 60. The amount invested is divided into equity (shares), corporate bonds and government securities. The good thing is that in this, investors can allocate assets as per their choice. Also, you can choose the option of active or auto mode in the fund.
There is also income tax exemption
NPS also provides tax exemption. Under Section 80CCD(1) of the Income Tax Act, you can get tax exemption by investing up to Rs 1.5 lakh in it. This exemption is included in the limit of 80C. Apart from this, investing in NPS gives an additional exemption of Rs 50,000 under Section 80CCD(1B). In this way, by investing in NPS, you can get a total tax exemption of up to Rs 2 lakh.
How much investment is required to get a pension of Rs 1 lakh
Now the question arises that how much should a 40-year-old person invest now so that he gets a pension of Rs 1 lakh every month when he turns 60. If a person starts investing in NPS at the age of 40 and continues investing till the age of 60 i.e. for 20 years, then he will have to create a corpus of about Rs 4.97 crore. This target is based on the condition that NPS gives an average annual return of 10% and the return on annuity after retirement is about 6%. Suppose you invest Rs 65,000 every month in NPS and get an average return of 10% for the next 20 years. Then your total maturity amount will be about Rs 4.97 crore. Meaning that you will have to invest Rs 65,000 every month for 20 years.
On what amount will the pension be calculated?
According to the rules of NPS, after retirement, you can withdraw up to 60% of the total amount tax-free. That is, out of Rs 4.97 crore, you can transfer Rs 2.98 crore directly to your account. The remaining 40% (Rs 1.99 crore) amount will have to be used to buy an annuity plan. If this amount gets an annual return of 6%, then you can get a pension of about Rs 1 lakh every month. It is worth noting here that this calculation is approximate. What will be the actual pension amount received after retirement will depend on the amount invested, the rate of return and the annuity plan chosen.
How much money will be received on NPS maturity
As per the rules of NPS, if the total fund is less than Rs 5 lakh, then you can withdraw the entire amount tax-free. If the fund is more than Rs 5 lakh, then 60% of the amount can be withdrawn tax-free. It is necessary to buy an annuity for the remaining 40% amount. You will also have to pay income tax as per your tax slab on the monthly pension received from the annuity.
