NPS Calculator: Creating a retirement fund is one of the most important aspects of portfolio management. To save himself after retirement, an earner needs to manage his portfolio in such a way where he is able to create both regular income and contingency fund for any kind of financial emergency. National Pension System (NPS) is an investment tool that caters to both the needs of a senior citizen. In an NPS scheme, the investor is obliged to buy an annuity worth at least 40 per cent of the maturity amount, while a maximum of 60 per cent can be withdrawn.
Speaking on the NPS scheme, Sebi registered tax and investment expert Jitendra Solanki said, “NPS gives both equity and debt exposure in a single investment. The NPS interest rate is not fixed as it depends on the debt and equity ratio chosen by the NPS account holder. NPS scheme allows an investor to choose equity exposure up to 75 per cent but the ideal equity debt ratio is 60:40. He advised NPS account holders to keep the annuity exposure at 40 per cent as it gives an annual return of around 6 per cent to the investor.
NPS Interest Rate
Jitendra Solanki said that if an investor chooses to have 60 per cent exposure in equity and 40 per cent in debt, he will get around 12 per cent return from equity and 8 per cent from debt exposure. In that case, the equity investment of the NPS account holder would yield around 7.20 per cent return (12 x 0.60), while the debt exposure would yield 3.20 per cent return (8 x 0.40), giving an annual NPS return of around 10 per cent.
Therefore, if an investor invests 10,000 per month for 30 years and 40 per cent of the maturity amount decides to buy an annuity, the NPS calculator suggests, keeping the 60:40 equity debt ratio in the NPS account that the investor will get 1,36,75,952 Withdrawal amount and monthly pension 45,587.
However, it 45,587 monthly pension can go up to 1.50 lakh if the investor uses his NPS withdrawal money 1,36,75,952.
pension calculator
advising NPS account holders to invest this NPS withdrawal amount in SWP (Systematic Withdrawal Plan); Pankaj Mathpal, Founder and Managing Director, Optima Money Managers Pvt Ltd said, “An SWP will give at least 8 per cent annual return to an investor. Hence, NPS account holders are advised to keep the NPS maturity amount in SWP for 25 years. If they invest 1.36 crore in SWP for 25 years, will be able to generate additional 1.03 lakh monthly income for himself for the next 25 years. In that case, his monthly pension will increase by about 46,000 approx 1.50 lakhs.”
Planning to buy SWP
When asked about SWP schemes that a senior citizen can expect an 8 per cent annual return, Pankaj Mathpal of Optima Money Managers listed the following:
1]ICICI Prudential Balanced Advantage Fund;
2]ABSL Balanced Advantage Fund;
3]Nippon India Balanced Advantage Fund; And
4]Axis Balanced Advantage Fund.
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