The National Pension Scheme (NPS) is a retirement-focused investment plan started by the Government of India. It offers market-linked returns, flexibility in asset allocation, and tax benefits to build a retirement corpus. A national pension scheme calculator is a useful tool for NPS investors.
- Projected Retirement Corpus
The key utility of a national pension scheme calculator is to estimate the retirement corpus you can accumulate through NPS investments. Based on monthly contributions, asset mix, returns, and tenure, it projects the final corpus available to generate retirement income. This helps set expectations for returns and fine-tune contributions to achieve your desired retirement amount.
- Optimal Asset Allocation
A defining feature of NPS is that investors can decide their asset mix across equity, debt, and other asset classes based on risk appetite and investment horizon. The NPS calculator allows backtesting various asset allocation models to project expected returns. This helps identify the optimal asset mix that can maximize returns within your risk tolerance.
- Impact of Higher Contributions
The national pension scheme calculator allows you to model various monthly contribution amounts and compare their impact on your retirement savings. You can check if increasing contributions by Rs 1,000 or Rs 3,000 per month makes a significant difference to your retirement readiness. This can guide decisions on enhancing voluntary contributions.
- Withdrawal Scenarios
Up to 60% of the NPS corpus can be withdrawn as a lump sum at retirement. The calculator helps estimate both the lump sum withdrawal amount and the residual regular pension from the remaining corpus. You can model different withdrawal scenarios and asset mixes to optimize both lump sums and pensions.
- Annuity Planning
At maturity, at least 40% of the NPS accumulations have to be used to purchase an annuity that provides a monthly pension. The calculator helps estimate the level of annuity you can expect at the current annuity rates offered by insurance companies. This assists in annuity planning and securing monthly income.
- Taxation Benefits
A unique benefit of NPS is that investments up to Rs. 50,000 qualify for tax deduction under Section 80CCD(1B). The calculator estimates the total tax savings you can avail of based on your contributions. Further, maturity proceeds are completely tax-free.
- Legacy Planning
The NPS allows nominations so that the accumulated corpus can be passed on to nominees in case of the untimely death of the investor. The calculator helps assess the legacy you can leave for your loved ones.
- Goal Planning
The calculator allows you to set specific retirement goals, like the corpus required or the income needed. It then calculates the investments needed to achieve those goals. This aligns your NPS investments with your life goals.
- Retirement Age Impact
You can change the retirement age assumption in the calculator to see the impact on the overall corpus size. Retiring later allows more time for accumulation and enhances the corpus. The calculator quantifies this impact. A person can also use fixed deposit calculator to know how will your corpus grow.
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In conclusion, a national pension scheme calculator helps with projecting the retirement corpus, optimizing asset allocation, planning contributions and withdrawals, estimating annuity income, calculating tax benefits, and planning legacy. For retirement planning focused on building a sizeable corpus, market-linked returns, and tax efficiency, NPS is an attractive option. Availing the NPS calculator facility offered by investing platforms like 5paisa can help you plan your investments better.