12,000 monthly savings can earn 1.78 lakh pension per month
NPS scheme: The National Pension System or NPS is a retirement benefit scheme introduced by the Indian government to facilitate regular income after retirement to all NPS account holders. Due to its post-retirement income characteristic, the NPS is also known as a government-backed pension plan. However, if one relies on the advice of tax and investment experts, one with a low risk appetite can go as far as ??1.78 lakh monthly income investment ??12,000 per month on their NPS account. They advised NPS subscribers to use the SWP (Systematic Withdrawal Plan) and improve their monthly income after retirement.
Speaking on the NPS regime, Jitendra Solanki, SEBI registered tax and investment expert, said: “An NPS account holder can choose up to 75% equity exposure on their NPS account. However, the best practice is to keep the exposure to 60% equities and debt. 40% exposure. This is also suitable for NP subscribers, who have a low risk appetite. Maintaining 60:40 equity and debt exposure will help the NPS account holder to reap around 10% NPS interest rate in the long term. “
Solanki said that if an investor invests ??12,000 per month in his NPS account for 30 years by keeping equity and debt exposure in a 60:40 ratio and purchasing an annuity worth 40 percent of the net maturity amount. NPS, we would get ??1 64 11 142 lump sum and ??A 54,704 monthly pension in the form of an annuity would yield an annual return of at least 6 percent.
However, some people may wish to purchase an annuity worth 50 percent of the net amount at maturity of the NPS. In this case, the NPS calculator suggests that the monthly pension would be ??68,330 while the amount of the lump sum withdrawal will be reduced to ??184.108.40.2062.
Advise NPS account holders to use the lump sum in SWP to improve their monthly income; Amit Gupta, MD at SAG Infotech, said: “For a total investment of 1.36 crore over a 25-year period at an expected rate of 8% per annum, the investor would be able to make monthly withdrawals of ??1 02 464,455, each month for 25 years. “
Likewise, if the holder of the NPS account has maintained his exposure to the annuity at 40%, in this case his lump sum withdrawal will be ??1.64 crore.
On how much we would get after investing ??1.64 crore in SWP; Pankaj Mathpal, Managing Director and CEO of Optima Money Managers said: “Invest ??SWP 1.64 crore for 25 years would help an investor exit ??1 23 560 or ??1.23 lakh per month for the above years if the SWP return is 8 percent per year. “
This means that if a person invests ??12,000 per month in his NPS account for 30 years keeping exposure to equity debt in a 50:50 ratio, then we would move ??1.70 lakh per month – ??68 330 of the pension return and ??1.02 lakh of SWP.
However, if an NPS account holder invests ??12,000 per month in an NPS account keeping the annuity exposure at 40 percent, in which case one would be able to generate approximately ??1.78 lakh per month – ??54,704 annuity and ??1.23 lakh of SWP.
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