Retirement planning is very important and the best instrument for this is NPS. When you do retirement planning, you have to do the reverse calculation. That is, you do not have to see how much money you want to invest, rather you need to understand how much money you will need on retirement. Let us understand how to invest if you want to get a pension of Rs 2 lakh.
First understand how much money you will need
If we look at the metro cities today, then to live a good life, you need at least 50 thousand rupees every month. This includes your house rent, car expenses, food, travel etc. Now if you are 30 years old today and want to live the same life after 30 years i.e. after retirement at the age of 60 without doing anything, then at that time you will need 3-4 times more money than today. That means you will need about 2 lakh rupees every month on retirement.
So how big a corpus should be created?
If you look at the current FD rates, they are around 6-7 percent. We assume that when you retire, you will get at least 5 percent interest and if you get more interest, you will benefit more. In such a situation, if you need Rs 2 lakh every month, then you will need an interest of Rs 24 lakh annually. If you need an interest of Rs 24 lakh at the rate of 5 percent, then for this you should have a corpus of about Rs 5 crore. This will give you an interest of about Rs 25 lakh at the rate of 5 percent annually.
You will have two options upon retirement
When you retire, you will have two options. Either you invest all your money in an annuity plan and start getting pension from it. Or you withdraw 60% of the amount and make an annuity plan with the remaining 40%. At least 40% of the NPS has to be invested in annuity plan on retirement. We are assuming that you invest your entire corpus in an annuity plan and get pension on it. In this way, your target can be achieved.
How much money should you invest?
If you are 30 years old now and want to create a corpus of Rs 5 crore on retirement, then first you have to understand how much interest you can get. An average interest of 10 percent is easily available on NPS. In such a situation, if you invest about Rs 22,150 in NPS every month, then in 30 years your money will become about Rs 5 crore at the rate of 10 percent interest per annum. This will be possible due to the power of compounding. Your total investment in these 30 years will be about Rs 79.74 lakh. At the same time, you will get an interest of about Rs 4.21 crore on this.
Increase investment by 10% every year, calculation will change
If you start by investing just Rs 8000 in NPS every month and increase the investment amount by 10 percent every year, then in 30 years your money will become around Rs 5.13 crore at an annual interest rate of 10 percent. Your total investment in these 30 years will be around Rs 1.58 crore. At the same time, you will get an interest of about Rs 3.55 crore on this. In this method, your total investment will be more, but in the beginning the burden of investment will be less on you. At the same time, your salary or income will keep increasing every year, with which you can easily increase the investment.
