31 Years Old Wife Contributing to NPS: Is it Enough for Retirement?

Ans: Hello, NPS is an instrument to save tax according to me
Investments should be super liquid, and since NPS is not liquid till retirement, you can choose Mutual Funds instead of NPS

Ans: Yes, you can invest Rs 40,000 per month in the National Pension Scheme (NPS). There is no maximum limit on the monthly contributions to NPS.

Important to note about NPS returns:

• NPS returns are market-linked and depend on the chosen investment scheme. The NPS offers various investment options like Equity (E), Corporate Debt (C), Government Bonds (G), Alternative Investment Funds (A). Equity (E) scheme typically has higher returns than other schemes (C, G) but also comes with higher risk.
• It is difficult to predict the exact returns you will get in 10 years as the market is volatile.

Here's an example to give you an idea

Let’s assume you choose an equity scheme with an average annual return of 10%.

• Total investment over 10 years = Rs 40000 per month * 12 months/year * 10 years = Rs 48,00,000
• Estimated returns in 10 years = Rs 48,00,000 * 10% = Rs 4,80,000

This is just an estimate, and actual returns may vary.

Here are some resources that can help you make an informed decision:

• NPS calculator: You can use an NPS calculator to get a more personalised estimate of your retirement corpus and pension amount. These calculators consider factors like your age, investment amount, investment scheme chosen, and expected rate of return.
• NPS investment options: You can find more information about the different NPS investment options on the PFRDA website (https://www.pfrda.org.in/)

Remember, NPS is a long-term investment for retirement planning. Investing early and regularly will help you build a substantial corpus for your retirement.

Ans: Increase your SIP in mutual funds as with current investment of SIP you will be able to make 2.25 to 2.5 crore

Ans: Hello;

You may invest in NPS upto the age of 70.

However even auto choice would also only allow 60-50% equity allocation at this age.

If this is okay with then please go ahead.

Else you may also think about investing in ICICI Pru Retirement Fund (G) -Hybrid Aggressive plan which is a type of solution oriented mutual fund for retirement planning.

It comes with a mandatory 5 year lock-in.

Equity allocation maybe between 65-80% and debt allocation maybe 35-20%.

Select whatever suits your risk tolerance.

Happy Investing!!

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.

Ans: You are 50 years old now. You have built a good NPS corpus of Rs 27 lakh.

You are adding Rs 23,000 monthly. You plan to retire at 60. That gives you 10 more years.

Your question is about how much pension you can expect from NPS. But let us go beyond the pension figure. Let us look at all options and risks.

Let us take a full 360-degree approach. That will help you take better control.

Growth of Your NPS Corpus by Retirement

Your present corpus is Rs 27 lakh. Monthly contribution is Rs 23,000.

You are disciplined. That is very good.

Assuming steady returns for the next 10 years, your final corpus may grow well.

A rough estimate may take your NPS to between Rs 1.35 crore and Rs 1.50 crore.

This is only an estimate. Final value depends on equity-debt split and market movement.

NPS Withdrawal Rules at Age 60

At age 60, you can take 60% of the corpus as lump sum.

Remaining 40% must be used to buy pension from NPS provider.

So, if you have Rs 1.50 crore corpus, Rs 90 lakh can be withdrawn.

Rs 60 lakh must be used to buy annuity.

Monthly Pension Depends on Annuity Type

Pension depends on which annuity option you choose.

Also depends on age, provider and current annuity rates.

Usually, annuity rates are between 5% to 6.5% for most people.

So, Rs 60 lakh may give Rs 25,000 to Rs 32,500 per month.

Pension is taxable. It will be added to your income and taxed as per your slab.

But There is a Catch with NPS Annuity

Annuity is compulsory for 40% portion in NPS.

You cannot escape that even if returns are low.

Returns from annuity are not inflation-adjusted.

If inflation is 6%, and annuity gives 6%, you are just breaking even.

That means purchasing power keeps falling over years.

In short, your real income from annuity becomes weaker each year.

Disadvantages of NPS-Based Annuity

Here are some issues you should be aware of:

No flexibility. Annuity is fixed. It cannot be changed once chosen.

Poor returns. Much lower than mutual fund withdrawal options.

Fully taxable. Entire pension amount is added to your income.

No inflation protection. Value of your monthly pension goes down with time.

No control over capital. You cannot access the lump sum again.

Limited choices. Few annuity providers and fixed structure.

Tax-Free Lump Sum Can Be Better Utilised

The 60% part you withdraw is tax-free. That is a very good thing.

You can use that for better planning. Mutual fund investments through regular route with Certified Financial Planner can give you more flexibility.

With proper planning, this amount can support your monthly needs for many years.

And unlike annuity, you have control over how you withdraw and invest.

How Mutual Fund Option Is Better Than Annuity

If you want to get monthly income, mutual funds can help you do that.

You can use SWP (Systematic Withdrawal Plan).

You can choose how much to withdraw every month.

You can increase or reduce withdrawal as needed.

Your balance corpus stays invested and keeps growing.

You can invest based on your risk level—conservative, balanced, or aggressive.

You can stop or change plans anytime. No such option in annuity.

Tax is paid only on gains, not full withdrawal.

Equity mutual funds have only 12.5% LTCG tax after Rs 1.25 lakh gain.

Debt mutual fund gains are taxed as per your slab. Still more flexible than annuity.

You can invest through regular plans with help from a CFP and get long-term handholding.

This helps to keep the capital growing, while withdrawing monthly income.

You Can Mix Both Approaches After Retirement

You don’t have to depend only on annuity.

You can plan like this:

Take 60% lump sum (tax-free). Invest it in mutual funds with SWP.

Get better income flexibility, tax efficiency, and capital appreciation.

From the 40% annuity, choose the minimum guaranteed monthly pension.

That gives a backup pension for essential expenses.

This gives dual benefit: safety from annuity and growth from mutual fund.

Better Control with Mutual Fund via Certified Financial Planner

If you go through regular plans with guidance of a CFP, you get personal attention.

Direct plans give no support. You will be alone in tracking and adjusting.

That increases mistakes. Most retirees are not comfortable doing this alone.

With a regular plan and a CFP, you get:

Portfolio review every year.

Tax planning help.

Rebalancing advice.

Switching between funds when needed.

Better exit strategy over 25+ years post-retirement.

At 60, Plan Based on Real Expenses

You should also think how much you will need per month at retirement.

Suppose your basic expense is Rs 50,000 now.

In 10 years, it may become Rs 1 lakh per month.

So, don’t assume current pension amount is enough.

Your plan must consider inflation.

Only mutual fund approach gives you inflation-adjusted income.

Have You Invested in LIC or ULIPs?

If you have LIC endowment plans or ULIP schemes, please review them.

These give poor returns and lock your money.

They mix insurance with investment. That’s never wise.

If you hold such policies, consider surrendering them.

Reinvest that amount in mutual funds with proper planning.

This improves your retirement strength.

Do You Have Emergency Corpus Separately?

Even after NPS maturity, don’t forget emergency fund.

Always keep 6 to 12 months of expenses separately.

It should be in liquid or ultra-short-term funds.

This helps to avoid breaking long-term investment.

Keep this buffer outside your NPS or pension plan.

What Happens to NPS Corpus If You Die?

If you die before age 60, your nominee gets full corpus.

No annuity is forced in that case.

They can withdraw fully. That is a good feature.

But after annuity starts, if you die, your nominee gets lesser amount.

So, if your spouse depends on your income, plan accordingly.

Choose annuity with spouse benefit or better use mutual funds.

Retirement Is 10 Years Away—Plan Now Itself

Many wait till 60 and then think. That’s a mistake.

You have 10 years. That is a blessing.

You can plan better now. Start SIPs in mutual funds alongside NPS.

Create your own retirement income engine.

Don’t depend only on NPS. Build personal retirement corpus too.

Have You Made a Will?

This is not related to pension. But very important.

Make a proper will. Mention nominee names for NPS, bank, mutual funds.

Also, create a joint holding in all investments if possible.

This ensures no legal fights for your family.

Finally

Your NPS pension will give around Rs 25,000 to Rs 32,500 per month.

But that is not inflation-proof.

It is taxable. And inflexible.

So, you must plan beyond NPS annuity.

Use your lump sum wisely. Invest with a Certified Financial Planner.

Get SWP from mutual funds. Adjust income as per inflation.

Build emergency fund. Avoid LIC/ULIP traps. Create a personal will.

Only a full strategy will give peace and safety in your golden years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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