Top News

NPS Investment: You don't need to start with a huge sum for retirement planning; you can begin with a small amount. Let’s assume you invest ₹3,000 per month in the National Pension System (NPS) and continue doing so for 30 years.

If you earn an average annual return of 10% during this period, your corpus could grow to approximately ₹67.8 lakh by the time you turn 60. However, keep in mind that NPS returns are market-linked; this means your fund value could end up being lower or higher than this estimate.

How much money will accumulate in 30 years?

Investing ₹3,000 per month results in an annual contribution of ₹36,000. Over 30 years, your total out-of-pocket investment would amount to ₹10.80 lakh.

The remainder of the corpus is generated through returns. Assuming an average annual return of 10%, your total corpus could reach around ₹67.8 lakh—meaning approximately ₹57 lakh would be generated from returns alone.

Calculation at a glance

Parameter    Amount
Monthly investment    ₹3,000
Investment tenure    30 years
Total investment    ₹10.80 lakh
Estimated average return    10% per annum
Estimated returns    Approx. ₹57 lakh
Estimated total corpus    Approx. ₹67.8 lakh

Compounding builds a substantial fund.

In NPS, your money remains invested for the long term. The returns earned during this period also generate further earnings; this is known as the benefit of compounding.

Initially, the growth of the fund may appear slow, but the impact becomes much more significant over time. That is why a long-term horizon is crucial for retirement planning.

What if you invest ₹5,000 instead of ₹3,000?

Now, suppose you invest ₹5,000 per month instead of ₹3,000. Assuming the same average annual return of 10%, your corpus could grow to approximately ₹1.13 crore over 30 years. In other words, investing just ₹2,000 more per month can lead to a significant difference in the corpus over the long term.

Conditions for withdrawing money from NPS

Upon 'normal exit' from the NPS—that is, at the age of 60 or upon superannuation—a maximum of 60% of the corpus can be withdrawn as a lump sum. It is mandatory to use at least 40% of the remaining amount to purchase an annuity. The annuity provides a regular pension after retirement.

For instance, if the NPS corpus amounts to ₹67.8 lakh at retirement, approximately ₹40.68 lakh can be withdrawn as a lump sum, while ₹27.12 lakh must be invested in an annuity. The pension amount received from the annuity depends on the chosen plan and the prevailing annuity rates at that time.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.