Several young Indians struggle to answer the question – how much do I need for retirement? Given increasing inflation rates and a rising standard of living, savings alone may not be adequate for future expenses. Pension plans like the National Pension System (NPS) help you grow your money and gain financial stability in your golden years.
The Importance of Pension Plans
While planning for the future, pension plans like the NPS provide the following benefits:
Financial Security
The NPS helps you grow a corpus to purchase an annuity that provides monthly payouts for the rest of your life. It offers financial stability and security after you retire.
Maintain Your Lifestyle
While working, most people get used to a particular standard of living. Some enjoy annual vacations, while others visit good restaurants every week. After retiring, people may have to compromise their standard of living to make ends meet without a regular income. Pension plans like NPS allow you to be ready to maintain your lifestyle after retirement.
Medical Expenses
Many people deal with health concerns and rising medical bills as they become older. The steady income from pension plans like NPS helps cover hospital and other medical expenses.
Continued Independence
Crucially, planning your retirement savings empowers you to remain financially independent for the rest of your life. You can rely on your pension to look after all your living expenses without becoming dependent on your loved ones.
Let’s explore how NPS can help you gain a steady monthly pension of Rs. 1,00,000. This will require a significant financial planning.
Here’s how you can grow your corpus to secure the pension.
Start Early
Securing a monthly pension of Rs. 1,00,000 requires you to build a corpus of around Rs 4.50 crore at retirement. Consider subscribing to the NPS as early as 30. Early start allows you to grow your wealth over a period of time to secure your retirement.
Increase Your Contributions Consistently
You can start with an investment of Rs. 7,000 per month. Put the money into your NPS account when your salary gets credited. Think of it as paying yourself first before spending on your other wants and luxuries. Every year, as your income increases, increase your contribution amount by at least 10%.
Identify the Ideal Investment Mix
NPS allows you to choose how your money gets invested. You can select a good balance between high-risk, high-reward investments like equities and safer avenues like government bonds. Select an investment mix that works for your risk appetite. You want to opt for asset-mix that provide at least 10% returns on your investment. Remember, your interest gets reinvested in the NPS, allowing for exponential growth over the decades.
Purchase the Right Annuity
You must use at least 40% of your NPS corpus to purchase an annuity on retirement. Identify annuity options that offer a rate of at least 7%. Even with the minimum 40% invested in annuities, you can enjoy a monthly pension of more than Rs. 1,00,000.
In order to know your estimated monthly pension,
NPS empowers you to enjoy financial stability during your golden years. Following these tips, you can invest enough to grow a significant corpus of nearly Rs. 4.5 crores and maintain your standard of living for the rest of your life. You can use the amount to look after your medical expenses and enjoy life without compromises.
Visit the HDFC Pension website to subscribe to the NPS today and start your journey towards financial freedom.
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