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Aggressive 26yo Investing in NPS: 57k Now, 1 Lakh Pension Goal - Feasible?

Milind

Milind Vadjikar  | Answer  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Apr 04, 2025

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Shubham Question by Shubham on Apr 04, 2025Hindi
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Sir, Age: 26 Subject: NPS ( National Pension Scheme) Scheme Choice : LC 75 ( Aggressive Auto Choice) Tier : Tier 1 Pension Fund: ICICI Prudential Pension Fund Current value of scheme : Rs. 57927/- Investing Rs. 5600/- on a monthly basis My goals: Want my portfolio to beat inflation and provide a pension of Rs. 1 lakh monthly ( in hopes that beating inflation value of Rs. 1 lakh does not decrease over time) Time horizon : 34 years Questions: 1. Sir will my NPS scheme beat inflation? 2. Is the Pension Fund ( ICICI Prudential) a good choice or should I shift? 3. Will one lakh pension after 34 years be enough to support my lifestyle? (Assuming that everything pans out smoothly) 4. Judging by today's tax law income up to 12 lakh p.a. is non taxable, will I be taxed on my pension still if the law remains as is? (Hypothetical question) My details : 1.Unmarried, never planning on marriage or kids ever. 2.Current utility bills amount to Rs. 15,000 per month 3. Other expenses Rs. 5-7k per month. 4. I have other investments too, but I want to know if I can rely on NPS in old age or not. With this information alone, is retirement with NPS feasible?

Ans: Hello;

Your current expenses add upto 22 K per month.

After 34 years this amount will be 1.6 L per month considering 6% inflation.

This would need a corpus of 5-6 Cr.

Your current investment would fetch you around 1.2 Cr which is quite low.

You need to invest minimum 25 K per month in NPS to expect 5 Cr+ corpus build after 34 years. (A modest 8% return considered from NPS)

Also you may shift from Auto choice to Active choice so as to ensure 75% allocation to equity upto 50 age.(In Auto choice after 35 age equity allocation is tapered down).

You are allowed to have different fund managers for different asset classes based on their performance in respective category.

Current fund manager looks okay however you need to review performance every year.

For generating retirement corpus it is better to have 2-3 investment avenues rather then a single one.

A mix of EPF/PPF, NPS and MFs should be more appropriate.

Best wishes;
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8923 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 26, 2024

Asked by Anonymous - Mar 21, 2024Hindi
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Good Afternoon Sir I am Ashok Kumar, aged 50 years. I am working in Haryana as State Government Employee since March 2013. Myself share (@ 10% of Basic+DA) as well as Government share (@14% of Basic+DA) is contributing in my PRAN under NPS scheme in following schemes (default scheme set-up):- i) SBI Pension Fund Scheme (34.0%)- State Govt. ii) UTI Retirement Solutions Pension Fund Scheme (32.0%)- State Govt. iii) LIC Pension Fund Scheme - State Govt. (34.0%)- State Govt. Total contribution in my PRAN till date is Rs. 12.216 lakhs and Total Notional Gain is Rs. 6.026 Lakhs i.e. a return of approx. 9.0 % is showing in the statement provided by NPS/PROTEAN. Here, my question is whether i should go with the above current schemes or i should change above schemes so that i can get maximum benefit at the time of retirement. If i have to change the schemes, kindly also suggest schemes so that i can opts for the same. Thanking you
Ans: Ashok Kumar,

Thank you for your detailed query and the trust you have shown in seeking advice for your NPS investments. Your dedication to securing a better retirement is commendable.

Let's analyze and evaluate your current investment strategy in the National Pension System (NPS) to help you make informed decisions for maximum benefit at retirement.

Current NPS Allocation Analysis
You have a diversified allocation in the default schemes set up by the State Government:

SBI Pension Fund Scheme (34%)
UTI Retirement Solutions Pension Fund Scheme (32%)
LIC Pension Fund Scheme (34%)
Your total contribution till date is Rs. 12.216 lakhs with a notional gain of Rs. 6.026 lakhs, reflecting an approximate return of 9%.

This indicates a stable growth, but let's assess if this is optimal for your retirement goals.

Assessing the Need for Change
When considering changes to your investment strategy, several factors need to be evaluated:

1. Risk Tolerance and Time Horizon
Given your age of 50, your risk tolerance and investment horizon are crucial. With potentially 10-15 years until retirement, balancing growth and safety becomes essential.

2. Performance of Current Schemes
Review the past performance of the SBI, UTI, and LIC pension funds. While historical performance isn't a guarantee of future results, it provides insight into the fund managers' capabilities.

3. Fund Management Style
Actively managed funds can outperform the market with skilled managers. It’s important to verify that the fund managers of your current schemes have a consistent track record of delivering returns above the benchmark.

Recommendations for Optimal NPS Strategy
1. Re-Evaluation of Pension Funds
Consider diversifying into funds with a strong performance record. Reviewing quarterly and annual returns can guide your decision on maintaining or switching funds.

2. Consider Actively Managed Funds
Actively managed funds often yield better returns compared to passive funds due to the expertise of fund managers. They can adapt to market changes and take advantage of opportunities.

3. Avoid Direct Funds
Direct funds require active monitoring and investment knowledge. Regular funds managed through a Certified Financial Planner (CFP) provide professional oversight and strategic adjustments, ensuring your portfolio aligns with your goals.

Benefits of Professional Guidance
1. Strategic Asset Allocation
A CFP can help you align your asset allocation with your risk tolerance and retirement goals. They provide a balanced mix of equity, corporate debt, and government securities tailored to your needs.

2. Ongoing Portfolio Management
Continuous monitoring and rebalancing by a CFP ensure your investments stay on track. This professional management adapts to market conditions and personal changes.

3. Maximizing Returns
A CFP's expertise helps in identifying high-performing funds and making informed switches. This proactive approach aims to maximize your retirement corpus.

Final Thoughts
Your current NPS allocation has provided decent returns, but there’s potential for improvement. Evaluating your funds' performance and considering actively managed options can enhance your retirement savings.

With a strategic approach and professional guidance, you can optimize your NPS investments for a secure and comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8923 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 09, 2025

Asked by Anonymous - Jun 06, 2025
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Hi, I am 49.5 years old and planning to retire at the age of 60. I have a 16-year-old son. My net monthly income (post all deductions) is approximately Rs 2.25 lakhs. Here is a summary of my current financial portfolio: Mutual Funds: Rs 35 lakhs Stocks: Rs 1.5 lakhs NPS: Rs 23 lakhs (currently contributing Rs 27,000/month) PPF: Rs 40 lakhs EPF: Rs 48 lakhs Fixed Deposits: Rs 1.2 crores (I do not wish to touch this corpus) I currently invest Rs 55,000 per month in Mutual Funds and Rs 27,000 in NPS. I am considering increasing my NPS contribution to Rs 1.2 lakhs per month. Would this be a good decision? Additional Details: I own two flats: one is self-occupied, and the other is rented out. I have no liabilities or outstanding loans. My monthly expenses are Rs 50,000 to Rs 60,000, excluding school fees. I have health insurance coverage through my employer, as well as a personal health insurance policy of Rs 25 lakhs. I do not have any other insurance policies. My Questions: What should be my target retirement corpus if I plan to retire at age 60? Is increasing my NPS contribution to Rs 1.2 lakhs per month advisable, or should I consider an alternate investment strategy? Thanks in advance for your guidance.
Ans: At 49.5 years old, you have a stable income, no liabilities, and a diversified investment portfolio. Since you aim to retire at 60, this is the right time to fine-tune your strategy to meet your goals comfortably.

Let’s look at your situation from all angles — retirement corpus target, investment strategy, NPS contribution, mutual fund role, and future steps — in a simple, structured, and easy-to-understand manner.

Retirement Goal: How Much You May Need
You currently spend around Rs. 60,000 per month. This will increase due to inflation.

In 11 years, your monthly expense may rise to about Rs. 1.07 lakh.

Your yearly expense may become Rs. 12.8 lakh.

You will need this income every year for 20–25 years after retirement.

To manage this, a retirement corpus of Rs. 4 crore to Rs. 5 crore may be required.

This amount will cover your post-retirement life with inflation-adjusted expenses.

Current Investments and Where You Stand Today
Here is your current retirement-focused asset summary:

Mutual Funds: Rs. 35 lakh

Stocks: Rs. 1.5 lakh

NPS: Rs. 23 lakh (with Rs. 27,000/month SIP)

PPF: Rs. 40 lakh

EPF: Rs. 48 lakh

FDs: Rs. 1.2 crore (you do not want to use this)

Total working retirement assets (excluding FD): Rs. 1.47 crore.

You have 11 years to grow this into Rs. 4–5 crore. This is possible with the right strategy.

Should You Increase NPS to Rs. 1.2 lakh/month?
Let us break this down thoughtfully and clearly.

Pros of Higher NPS Contribution:

You can save more tax under sections 80C, 80CCD(1B), and 80CCD(2).

NPS is low-cost and has auto asset allocation.

It ensures forced discipline as you can’t withdraw before 60 (Tier 1).

Cons of Higher NPS Contribution:

Locked till retirement. No liquidity for any emergency.

You must buy an annuity with 40% at retirement. Annuity gives low returns and is taxable.

Maximum equity allowed is 75%. You miss higher long-term equity growth.

You can’t change or rebalance your portfolio freely.

Mutual Funds vs. NPS for Retirement
Now let us compare NPS with mutual fund SIPs.

Mutual Funds (through MFD and with CFP guidance):

You can choose actively managed funds, which aim for higher returns than index funds.

You get full control. You can stop, increase, or change funds as needed.

No lock-in (except ELSS). You can withdraw anytime in emergencies.

Funds are managed by professionals who adjust based on market movements.

NPS:

Offers low-cost investing and automatic rebalancing.

Returns are lower than mutual funds over long term due to equity limit.

You lose control over investment movement and withdrawal timing.

You must take part annuity after age 60 which reduces liquidity.

Your Ideal Monthly Investment Mix
You are already investing:

Rs. 55,000 in mutual funds

Rs. 27,000 in NPS

You want to invest more. Let’s divide this extra Rs. 93,000 wisely.

Increase NPS by Rs. 20,000 more to reach total of Rs. 47,000/month.

This helps you use full Rs. 2 lakh NPS benefit (Rs. 1.5 lakh + Rs. 50,000).

Use remaining Rs. 73,000/month in mutual fund SIPs.

Keep These Points in Mind
Don’t shift everything into NPS

You need some liquidity. Keep mutual funds for that.

Review your mutual fund portfolio

Ensure proper mix of large-cap, mid-cap, flexi-cap, and hybrid funds.

Avoid index funds. They copy markets and give average returns.

Active funds aim to beat the market. Use MFD and CFP to select better.

Don’t invest in direct plans

Direct plans may look cheaper but offer no expert guidance.

Regular plans through an MFD with CFP offer portfolio reviews and support.

This helps avoid emotional or wrong investment decisions.

Avoid insurance-cum-investment plans

You did not mention LIC or ULIPs. If you hold any, please surrender them.

Reinvest those proceeds into mutual funds through SIPs for better growth.

Child education needs separate planning

Your son is 16. Higher education goal is just 1–2 years away.

Keep this fund in low-risk mutual funds or short-term debt funds.

Avoid high equity exposure for this short goal.

Rebalancing is Important
Recheck your asset allocation every year.

Equity should reduce slightly as you near retirement.

Increase debt exposure through PPF, EPF, or debt mutual funds.

Keep Emergency Fund Ready

Your FDs are untouched. That is wise.

Also keep 6–12 months of expenses in a liquid fund or bank account.

Health Insurance is Sufficient

You have Rs. 25 lakh personal health cover.

You are also covered by employer policy.

At retirement, continue personal cover and add super top-up if needed.

Create Retirement Buckets

After retirement, divide your money in 3 buckets:

0–5 years: Keep in debt funds or FDs for safety.

6–10 years: Mix of hybrid and debt funds.

11+ years: Equity funds for long-term growth.

Finally
You are financially strong and on the right path.

Your goal of Rs. 4–5 crore is realistic and achievable.

Increase NPS only up to tax benefit level, not more.

Invest the rest in regular mutual fund SIPs through MFD + CFP.

Avoid index funds, annuities, and direct mutual funds.

Track your goals yearly. Adjust SIP amounts as income increases.

Stay disciplined and avoid unnecessary withdrawals.

This 360-degree strategy will secure your retirement without stress.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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