My wife is of 31 years age and currently depositing around 25k monthly in nps as part of her central government job. She will retire at the age of 65 so, can we depend entirely on this nps investment for our retirement? How much return we can expect during our retirement ?

Ans: Upon maturity of the NPS account, you can only withdraw 60% of the amount, and this is entirely tax-free. The balance 40% is used to buy an annuity. However, the annuity income is taxable as per the investor’s income tax slab rate in the year of payout.



With reference to contributing to NPS account on behalf of spouse, amount transferred to spouse’s NPS A/c will not be subject to tax.



However, Income from asset (amount) transferred directly or indirectly to spouse without consideration is clubbed in the hands of the transferor. Accordingly, the tax implication would be on you (Husband) wherever your wife gets pension as annuity Income (balance 40%).

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: Evaluating Your Current Retirement Portfolio
Your accumulated NPS amount of Rs. 14 lakh and consistent investment in mutual funds demonstrate disciplined financial planning. Let's assess if these investments will be sufficient for your retirement fund.

Understanding Your Retirement Goals
Retirement Corpus: To evaluate your retirement corpus, we need to understand your retirement goals. This includes your expected monthly expenses, lifestyle, and inflation.

Time Horizon: You have 6 years until retirement. This is a relatively short time frame for investment growth.

National Pension System (NPS)
Contribution and Growth: Your NPS has accumulated Rs. 14 lakh. NPS offers a mix of equity and debt investments, providing a balanced growth approach.

Tax Benefits: NPS contributions offer tax benefits, which is an added advantage. At retirement, you can withdraw up to 60% of the corpus tax-free, while 40% is mandatorily used for purchasing an annuity.

Mutual Fund Investments
Investment Pattern: Investing Rs. 10,000 monthly for the last 5 years shows a strong commitment. Mutual funds, especially equity funds, can offer higher returns over the long term.

Potential Growth: Assuming an average annual return of 12%, your mutual fund investments can grow significantly in the next 6 years. However, market volatility should be considered.

Assessing Sufficiency for Retirement
Projected Growth of NPS: Assuming an average annual return of 10%, your NPS corpus can grow considerably in the next 6 years. This growth will depend on the asset allocation within NPS.

Projected Growth of Mutual Funds: Your mutual fund investments will continue to grow. Consistent SIPs and market performance will influence the final corpus.

Expected Retirement Corpus:
Let's estimate the potential corpus at retirement:

NPS Corpus: Rs. 14 lakh growing at 10% annually.
Mutual Funds Corpus: Rs. 10,000 monthly SIP for 11 years growing at 12% annually.
Additional Considerations
Inflation: Consider inflation's impact on your retirement corpus. Inflation erodes the purchasing power of money over time.

Lifestyle and Expenses: Estimate your monthly expenses post-retirement. Include medical costs, travel, and other lifestyle choices.

Contingency Fund: Maintain a contingency fund for emergencies. This prevents dipping into retirement savings for unexpected expenses.

Recommendations for Enhancing Retirement Corpus
Increase SIP Amount: Gradually increase your SIP amount if possible. This leverages the power of compounding and accelerates growth.

Diversify Investments: Ensure your mutual fund portfolio is well-diversified across different sectors and market caps. This reduces risk and enhances returns.

Review and Rebalance: Regularly review and rebalance your portfolio. This ensures alignment with your risk profile and financial goals.

Consult a Certified Financial Planner: Personalized advice from a certified financial planner can help optimize your investment strategy. They can tailor recommendations based on your specific needs and goals.

Conclusion
Your current investments in NPS and mutual funds show good financial discipline. With some adjustments and increased contributions, you can work towards achieving a sufficient retirement corpus.

Consider inflation, lifestyle needs, and maintain a diversified portfolio. Regularly review and adjust your investments to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in