An NPS account holder can choose to have up to 75% equity exposure in his NPS account. However, the best practice is to keep equity exposure at 60 per cent and debt exposure at 40 per cent. It is also suitable for those NPS customers who have low risk appetite.
National Pension System i.e. NPS is a retirement benefit scheme launched by the Government of India, which provides the facility of regular income after retirement to all NPS account holders. Due to the post-retirement income facility, NPS is also known as a government-backed pension scheme. However, if we consider tax and investment experts, then a person with low risk appetite can earn Rs 1.80 lakh per month after retirement by depositing Rs 12,000 per month i.e. Rs 400 per day in his NPS account. . For this, experts advise NPS customers to use SWP i.e. Systematic Withdrawal Plan and increase their monthly income after retirement.
Understand about NPS
to Mint on the NPS scheme, Sebi Registered Tax and Investment Expert Jitendra Solanki said that an NPS account holder can choose to have up to 75 per cent equity exposure in his NPS account. However, the best practice is to keep equity exposure at 60 per cent and debt exposure at 40 per cent. It is also suitable for those NPS customers who have low risk appetite. Having 60:40 equity and debt exposure will help the NPS account holder to get around 10 per cent NPS interest rate over the long term.
How much will you have to invest
According to Solanki, if an investor invests Rs 12,000 per month in his NPS account for 30 years keeping the equity-debt exposure in the ratio 60:40 and buys an annuity 40 per cent of the net NPS maturity amount, he will get 1.64 crores. You will get a lump sum of Rs. 54,704 will give at least 6% annual return as monthly pension annuity. However, there may be some people who want to buy an annuity amounting to 50% of the Net NPS maturity amount. In that case, the NPS calculator suggests that the monthly pension would go up to Rs 68,330, while the lump sum withdrawal amount would go up to Rs 1,36,75,952.
How to benefit from investing in SWP
Advising the NPS account holders to use the lump sum amount in SWP to increase their monthly income, the expert said that for a total investment of 1.36 crores for a period of 25 years, at the expected rate of 8 per cent per annum, the investor would Will be able to withdraw Rs 1,02,464.455 for 25 years. Similarly, if the NPS account holder has placed the annuity risk at 40 per cent, then the one-time withdrawal would be Rs 1.64 crore.
Knowing how much one will get by investing Rs 1.64 crore in SPWP, experts say that investing Rs 1.64 crore in SWP for 25 years will help the investor to withdraw 1,23,560 or 1.23 lakh per month for the above years , if the SWP return is 8% per annum. This means, if a person invests Rs 12,000 per month i.e. Rs 400 per day in his NPS account for 30 years keeping equity credit risk in the ratio of 50:50, he will get around Rs 1.70 lakh per month i.e. Rs 68,330 will be given as annual return and Rs 1.02 lakh from SWP.