NPS Calculator

What is National Pension System (NPS)

The National Pension System (NPS) is a voluntary contribution retirement solution that was launched to help Indians prepare for their retirement. When it was first launched in 2004, NPS was available to government employees only. But in 2009, the scheme was opened to all sections of the public. When NPS subscribers reach the age of 60, they get a retirement lumpsum amount along with a regular monthly pension. This allows for a secure and stress-free retirement.

However, many people are unaware of the benefits that NPS offers and how the investment avenue can help create a substantial retirement corpus through regular investments.

Let us explore more about this topic and find out the importance of NPS. Besides, let's also consider the amount you would need to invest each year to create a substantial retirement corpus.

Benefits of NPS

There are several benefits of investing in NPS. Let's have a look:

• Higher returns than other retirement schemes: Investment returns are a crucial factor to consider before you invest for your retirement. You want to ensure that your final corpus is large enough for a comfortable and happy retirement. When you compare the returns on NPS against other retirement options, you will find that NPS has the potential of offering much higher returns. This is because NPS investments are linked to the equity market. A portion of your investment amount is put in equities. This gives you the opportunity to earn higher returns over the long term.

  S. No.	Investment Option	Rate of Return
  1	Fixed Deposits	4.00% to 6.20%*
  2	National Saving Certificate	6.80%
  3	Public Provident Fund	7.10%
  4	National Pension System	9.65%*

  * Fixed deposit return is of SBI for senior citizens

  **Return for NPS is calculated as a five-year return of HDFC Pension fund for aggressive mode

• World's cheapest retirement solution NPS is the lowest cost investment product for creating long-term retirement savings in the world. Overall, the entire investment cost comes up to just 0.02%. This makes it an attractive low cost retirement scheme.
• Highly flexible: NPS investments come with two options: active choice and auto choice. If you want to choose the asset class allocation by yourself, you can go for the auto choice. But if you want to automate your asset allocation, you can select the active choice where the allocation changes according to your age.

NPS subscribers can also choose an investment option based on the risk appetite. For instance, as an aggressive investor, you can have a higher exposure to equity. If you are a conservative investor, you have the option to increase your debt exposure instead. You also have the opportunity of replacing your fund manager in case you are not satisfied with the fund's performance.

Understanding the uses of the NPS calculator

The online NPS calculator is a handy tool that can help you make informed decisions about your investments. It gives you all the information you need in a matter of seconds. Here are two major ways it can help you.

• If you want to invest a specific amount of money each year, the calculator gives you the investment value at the end of the investment period.
• If you want a certain amount at the end of the investment period, the calculator tells you how much you need to start investing from now to achieve it.

In addition to this, the calculator also allows you to modify the input parameters so you can understand how they can make a difference to your overall returns.

How to use the NPS calculator

Let's find out how the different functions of the calculator are based on your requirement:

1. You want to invest a fixed amount each month/year and you want to know the final corpus at the end of your investment tenure

• Step 1: Select: 'For Retirement Goal'
• Step 2: Enter the amount you wish to invest monthly/yearly
• Step 3: Enter your age in years
• Step 3: Click on the button 'Calculate'

The NPS calculator will give you the value of the final corpus.

2. You want to know how much to invest each year to achieve a specific retirement amount

• Step 1: Select: 'For Investment Amount'
• Step 2: Enter the amount you wish to save for your goal
• Step 3: Enter your age in years
• Step 3: Click on the button 'Calculate'

Based on the information you have given, the calculator will tell you how much you need to start investing in NPS every year to achieve your goal.