Retire RICH! How to build a Rs 1 Lakh monthly pension after retirement with NPS?

As soon as one starts a job, they should start planning for retirement. The sooner you start planning for it, the more likely you are to arrange for a pension during retirement. But how to start it? So one answer to this is the National Pension System.

The National Pension System (NPS) is considered an effective option for achieving financial independence for retirement. This scheme is well-suited for long-term investments and provides excellent returns to investors due to the power of compounding. If one starts investing at the age of 20, they can receive Rs 1 lakh as a monthly pension upon retirement at 60.

The biggest advantage of investing in the NPS scheme is that it provides a lump sum amount along with a pension after retirement. Under this, the investor gets the option to withdraw 60% of the amount as a lump sum, while 40% of the amount goes to the annuity plan, which provides a regular pension.

Let's assume a person starts investing Rs 7,850 monthly in NPS at the age of 20 and invests for 40 years at a 10% annual return rate. During this period, their total investment amount will be Rs 37.68 lakh, while the interest earned will be Rs 4.63 crore. This way, the total funds will be over Rs 5 crore.

The funds you create by depositing at age 60 will be divided into two parts.

60% lump sum withdrawal: Rs 3.00 crore

40% investment in the annuity plan: Rs 2.00 crore

Based on an estimated annual return rate of 6% in the annuity plan, this annuity plan will provide you with a pension of Rs 1,00,116 every month.

You get the full benefit of compound interest if you start investing at 20.

The monthly investment amount can be increased over time.

Tax exemption is available on NPS investment under sections 80C and 80CCD (1B) of the Income Tax Act.

This scheme ensures regular income after retirement.