Investment Options for Building a Retirement Corpus
Achieving a monthly pension of ₹1 lakh requires disciplined retirement planning and early action. Here are the 2 best options which can help you achieve this goal:
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NPS (National Pension System):
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NPS is a voluntary defined contribution retirement scheme aimed at providing a steady income stream post-retirement.
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It is designed to empower subscribers to make optimal decisions impacting their future through sustained savings during their working life.
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The Pension Fund Regulatory & Development Authority (PFRDA) governs the scheme and invests in market-linked hybrid funds.
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NPS Account Structure:
Tier-I Account:
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Mandatory account where contributions accumulate, both from subscribers and employers.
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Withdrawals are restricted until subscribers comply with NPS exit rules.
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40% of the corpus must be reinvested in an annuity, while the remaining 60% can be withdrawn tax-free.
Tier-II Account:
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Financial Planning for 1 Lac Pension:
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Subscribers have the flexibility to choose investment products, such as allocating 60% in equity assets and 40% in debt.
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This balanced mix yields approximately 10% returns.
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Assuming a 30-year tenure, subscribers must contribute ₹15,000 monthly to attain a 1 lakh pension.
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60% of the retirement corpus is invested in an annuity, which returns 6% annually.
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Alternative Investment Scenario:
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With a 20-year investment horizon, subscribers must invest ₹32,000 per month.
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This assumes a 12% return rate to build a similar retirement corpus within a shorter time frame.
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SIPs (Systematic Investment Plans):
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For non-salaried individuals and the self-employed, SIP investments serve as an important component of retirement planning, offering a balanced exposure between equity and debt funds.
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Achieving a monthly pension of 1 lakh requires a targeted retirement corpus, which can be attained within a 20 to 30-year investment horizon, making it a realistic goal for investors.
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Systematic Investment Plans (SIPs) provide the most accessible pathway to reaching this financial milestone, offering affordability and sustainability over the long term.
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SIPs offer multiple advantages, catering to investors of all sizes. With no upper limit, they are inclusive and well-suited for retirement planning.
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Initiating an SIP requires a monthly investment of ₹500, available through both online and offline channels, enhancing accessibility for investors.
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SIPs provide flexibility in asset allocation, allowing investors to transition between equity and debt asset classes seamlessly.
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Equity Linked Savings Scheme (ELSS) funds enable tax savings in line with prevailing tax laws, enhancing the attractiveness of SIPs as a retirement planning tool.
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To achieve a 1 lakh pension, starting an SIP at age 30 with a 30-year investment horizon can yield substantial returns. For instance, a monthly SIP investment of ₹5666, generating a corpus of ₹2 Crore by age 60 (assuming a 12% annual yield), represents a standard performance benchmark within funds.
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By deploying 100% of the accumulated corpus, investors can reasonably anticipate a monthly pension of ₹1 lakh, assuming a conservative 6% annual return, which aligns with prevailing annuity standards.
Conclusion
Achieving a 1 Lakh monthly pension required strategic financial planning, disciplined investment, and a diversified approach to wealth accumulation. Individuals can work towards securing a stable and fulfilling retirement by using various investment options such as mutual funds, SIPs, annuities, and pension plans. With careful planning and diligent execution, realizing the goal of a 1 Lakh pension per month is within reach for those who are on the journey of retirement preparedness.