Is it possible to still get a monthly income even after retirement? The answer is yes if you have diligently and dedicatedly invested in a pension scheme. The Indian government started the National Pension System (NPS) for its employees in 2004, and afterward, the scheme opened for the public in 2009. This scheme focused on helping people build up their retirement funds by systematically investing a determined amount every month. If you plan to enroll and start investing in NPS, use the national pension scheme calculator to identify the apt amount to invest in the scheme.
Overview of an NPS Calculator
This calculator is a simple-to-use online tool that the National Pension System Trust and many other financial service providers have on their official portals. It helps people calculate the returns they could expect from investing in the national pension scheme. It is based on regular monthly payments, the proportion of corpus reinvested for purchasing annuities, and expected rates in terms of return on capital and annuity rate selected. This NPS calculator displays the potential monthly pension and lump Sum figure an NPS subscriber may expect upon maturity.
Attributes of an NPS Calculator
The attributes of a pension calculator are as follows:
- This calculator allows you to compute the expected monthly pension amount and the lump sum amount you can receive on maturity for different scenarios.
- You can utilize this calculator online through apps on your smartphone or different websites on your computer.
- It provides the convenience of calculating the pension amounts automatically and quickly without having to do it manually.
- The NPS pension calculator allows you to select and change the preferred monthly investment amount to determine the expected returns after you reach retirement age.
- You even have the choice of choosing the expected rate of return and the annuity rate to arrive at the target you want to achieve for your retirement corpus.
Steps to Use an NPS Calculator
Many pension calculators are available in the market that is similar to use, and all use the same formula for computation. However, the steps for using one of the best NPS calculators available on the National Pension System Trust website are as follows:
Step 1: On the National Pension System Trust official portal, go to the subscriber’s tab, then to the, I am interested in NPS option and click on the Calculate the pension need from the menu.
Step 2: The first field is My Date of Birth, where you must choose the month, year and date of birth from the calendar.
Step 3: Then, enter the amount you would want to invest in NPS per month in the following field of the NPS return calculator.
Step 4: The next field is where you will have to slide and select the number of years you plan to contribute towards NPS, which start with a minimum of 60 years and a maximum of 75 years.
Step 5: The following field, My total years of contribution, will automatically get calculated and displayed here.
Step 6: Next, slide and choose the rate of return that you expect from the NPS, which is the NPS interest rate.
Step 7: In the next field, you will have to select the percentage of the annuity that you would like to reinvest. The minimum percentage you will have to purchase is 40%, as stated by NPS rules.
Step 8: The last field is I am expecting an Annuity rate of, and here you will have to slide and choose the annuity rate percentage.
Once you complete the above steps, the NPS calculator of pension will automatically compute everything and display the Status of your Pension Account at retirement in a bar graph. It will also show a pie chart of Your pension corpus at retirement with annuity and lump sum value and Your Expected Monthly Pension value.
The NPS Pension Amount Calculating Formula
The formula for calculating the NPS pension amount used by everyone is as follows:
MV = P * (1 + R / N) ^ NT
Where the variable is,
MV = Maturity Value of the pension
P = Principal investment amount in total
R = Rate of Return that you expect
T = Tenure or number of years that you will invest in NPS
This formula uses the strength of compounding to grow the pension investment amount over the years, which finally matures into a significant amount.
Example of Calculating the Pension Amounts Using the National Pension System Trust Pension Calculator
To understand what NPS calculator is better using the National Pension System Trust pension calculator, study the following example:
You plan to start investing a monthly principal amount of INR 6000 and are 33 years old. You will have to continue investing for 27 years until you reach the minimum age requirement of 60 years. The rate at which you expect your return to grow annually is 8%, and you also plan to invest 60% of your Annuity amount at a 6% expected annuity rate.
In this scenario, using the National Pension System Trust pension calculator, the NPS formula values that come up are:
- The total investment that you made in 27 years is INR 1944000
- The total corpus of your retirement pension account is INR 8266622
- The annuity value of your pension corpus at retirement is INR 3306649
- The lump sum value of your pension corpus at retirement is INR 4959973
- Your expected monthly pension amount will be INR 24800
The NPS scheme is a helpful way to grow your wealth over the years until you reach retirement age by regularly investing a fixed part of your monthly income. However, you should be aware that this investing method carries a risk factor as it is related to the markets and their performance over the years. Therefore, starting early with this investment instrument is always better, so use the national pension scheme calculator to clarify your retirement goals and how much to invest to reach them. This calculator is a tool that helps you to make the best investment decisions and financial planning.