NPS Calculator: Want Rs 75,000 monthly pension post retirement? Here’s how much you need to invest

An ideal tool to build a retirement fund is the National Pension System (NPS). One of the most-preferred retirement planning instruments, NPS is a government-backed scheme that allows individuals to contribute regularly to a pension account while they are earning.

After their NPS account matures, account holders can withdraw a lumpsum amount from the corpus and subsequently invest the amount left to purchase an annuity for a fixed monthly pension.

Active and Auto-Choice options

NPS offers four asset classes - equity, corporate debt, government bonds and alternative investment funds. The investor has two options to invest in NPS — active and auto choice.

The first option lets the subscribers decide how the money should be invested in different asset classes including government securities, stocks and fixed instruments other than government securities. The maximum investment that can be made in equity is 75 per cent of the overall corpus. Once the subscriber gets over 50 years, the equity allocation amount decreases.

The second, auto, is the default option that invests money automatically taking into consideration, the age of the subscriber. Within the auto choice, there are three different options available - aggressive, moderate and conservative.

NPS annuity rule

Currently, subscribers are not allowed to withdraw the entire accumulated NPS corpus at maturity. They are required to invest a minimum of 40 per cent of the total NPS corpus to buy an annuity plan from a life insurer. This annuity amount is a regular pension that will be paid to subscribers post retirement. The remaining 60 per cent, on the other hand, can be withdrawn as lumpsum.

NPS calculator: How to get Rs 75,000 monthly pension after retirement?

Who doesn’t want a handsome amount in their bank accounts every month. So, if you wish to get more than Rs 75,000 as pension per month from your NPS investment, here is how much contribution you must make.

For this, the total accumulated NPS corpus must be Rs 3.83 crore at maturity (i.e., age of 60 years). Here, we are assuming we only use the mandatory 40 per cent of the NPS corpus to purchase the annuity. The annuity rate is assumed to be at 6 per cent interest per annum.

Just as in other long-term investment schemes, returns from NPS depend on when an individual starts investing i. e. at what age. Starting early and contributing regularly means building a solid retirement fund.

For instance, a 25-year-old is investing Rs 10,000 monthly in NPS for the next 35 years (i.e., till the age of 60 years). Assuming 10 per cent return per annum, the total NPS investment will grow into Rs 3,82,82,768 at the time of maturity. If they use 40 per cent of the total corpus to purchase annuity, they will get a pension of Rs 76,566 per month after retirement.

Those who start investing in NPS at the age of 30 must make a monthly contribution of Rs 16,500 for the next 30 years to get a Rs 75,218 monthly pension, post retirement. Joining NPS at the age of 35 means the individual needs to invest over Rs 28,500 monthly for the next 25 years for a fixed pension of Rs 76,260 after retirement.