NPS: Save Rs 5,400 every month, get Rs 2 crore on retirement

National Pension System: If you want to become a millionaire, then there are many ways to do this such as mutual funds, investing money in the stock market, etc. However, if you don't have enough time to keep track of the stock market, then the easiest way is to choose an investment option that is market-linked but doesn't much effort, you can opt for National Pension System (NPS).

NPS is a market-linked retirement-oriented investment option. Under this scheme, money is invested in two places, Equity i.e. Stock Market and Debt i.e. Government Bonds and Corporate Bonds. During account opening, you can choose how much of the money will go into equity. Usually, up to 75% of the money can go into equity, meaning that you are expected to get slightly higher returns than PPF or EPF.

Scenario 1

Say you want to become a millionaire through NPS. The method is easy, you just need a little trick. Suppose you are 25 years old at present. Say, you invest Rs 5,400 per month in NPS, that is, Rs 180 per day. 60 years is your retirement period. That is, you will invest in it for 35 years. Now suppose you got a return at the rate of 10%. So when you retire, your total pension wealth will be 2.02 crores.

Start investing in NPS

• Age: 25 years
• Investment: Rs 5,400 per month
• Investment period: 35 years
• Estimated return 10%
• Total invested amount: Rs 22.68 lakh
• Total interest received: Rs 1.79 crore
• Pension Wealth: Rs 2.02 Crore
• Total tax saving: Rs 6.80 lakh

Now, you cannot withdraw all this money at once. You can only take out only 60 percent of it and the remaining 40 percent will have to have to be put in an annuity plan, from which you get a pension every month. If you put 40% of your money in annuity, you will be able to withdraw a lump sum amount of Rs 1.21 crore and assuming the interest is 6%, then every month pension will be Rs 40,000 rupees.

Pension account

• Annuity: 40 percent
• Estimated interest rate: 6%
• Lump sum amount received: 1.21 crore
• Monthly pension: Rs 40,477

Scenario 2

Keep in mind that the sooner you start investing in NPS, the more lump sum amount you will get and the more pension will be made. If you start investing in NPS at the age of 30, then see how much pension will be generated.

Start investing in NPS

• Current age: 30 years
• Investment: Rs 5400 per month
• Investment period: 30 years
• Estimated return: 10%
• Total invested: Rs 19.44 lakh
• Total interest received: Rs 1.01 crore
• Pension Wealth: 1.20 crore
• Total tax saving: Rs 5.83 lakh

Pension account

• Annuity: 40 percent
• Estimated interest rate: 6%
• Lump sum amount received: Rs 72.56 lakh
• Monthly pension: Rs 24,188

So the basic mantra is to start investing as early as possible so that in old age you can at least retire by becoming a millionaire.