NPS Calculator: How large a retirement fund will be created by investing ₹10,000 monthly in NPS starting at age 40?

NPS Calculator: The National Pension System (NPS) is an excellent investment option for those seeking a regular income after retirement. The government launched this scheme for government employees in 2004 and opened it to the general public in 2009. This means one does not need to be a government employee to invest in the scheme.

Investing in NPS ensures regular income after retirement

A key feature of the National Pension System (NPS) is that regular investments allow the corpus to grow significantly by the time the investor turns 60. Upon maturity, a substantial portion of this fund is received as a lump sum, while the remaining amount is used to purchase an annuity. This annuity provides the investor with a monthly pension, eliminating the need to rely on others for essential post-retirement expenses.

A substantial corpus can be built even by starting investment at age 40

Many believe that starting early is essential to build a large corpus through NPS; however, this is not the case. Even a 40-year-old can build a significant fund by making monthly NPS contributions until retirement. If a 40-year-old begins investing in NPS, they have a total investment horizon of 20 years—sufficient time for the investment value to grow substantially.

The investor receives a large lump-sum amount upon maturity

Consider a 40-year-old individual who starts investing ₹10,000 per month in NPS. Over 20 years, they invest a total of ₹24,00,000. Assuming an annual return of 9%, they would earn ₹42,78,869 in interest on their investment. Consequently, upon reaching the age of 60, their NPS fund would amount to ₹66,78,869. Out of this amount, ₹26,71,548 must be used to purchase an annuity. This means that upon maturity, a lump sum of ₹40,07,321 will be received.

The total corpus depends on the rate of return.

It is worth noting that if the return is 10% or higher, a substantial corpus will be accumulated upon the maturity of the NPS. At a 10% return, a corpus of ₹76.57 lakh would be generated; this comprises an invested amount of ₹24 lakh and interest earnings of ₹52.57 lakh. This implies that for every 1% increase in the rate of return, the corpus grows by ₹10 lakh.

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