May 28, 2024

The National Pension Scheme (NPS) is a popular avenue for securing a steady income during retirement. While it’s advantageous to begin early, it’s still possible to target a monthly pension of Rs 2 lakh even with a shorter investment horizon. Here’s how you can strategize your NPS contributions to achieve this objective.

Rules Regarding NPS Withdrawals

At present, NPS subscribers are unable to withdraw the entire corpus upon maturity. A minimum of 40 percent must be allocated to purchase an annuity plan, which provides a regular income stream. The remaining 60 percent is available for withdrawal. However, subscribers also have the option to choose a 100 percent annuity.

Investment Plan for a Rs 2 Lakh Monthly Pension

Suppose you are 40 years old and intend to invest in NPS for 20 years in order to receive a monthly pension of Rs 2 lakh. Here’s a breakdown of what needs to be done.

• To secure a monthly pension of Rs 2 lakh, you will require a total maturity corpus of Rs 4.02 crore, based on an assumed 6 percent return over 20 years.

• You will need to invest in a 40 percent annuity, which amounts to Rs 1.61 crore.

• The remaining Rs 2.41 crore (60 percent) can be withdrawn.

Achieving a Corpus of Over Rs 4 Crore in 20 Years

To accumulate a corpus exceeding Rs 4 crore in 20 years, you will need to contribute Rs 52,500 every month to your NPS account, assuming a 10 percent return. This strategy will enable you to reach a maturity corpus of Rs 4.02 crore. Commence your NPS contribution planning today to ensure a financially secure retirement.