Here's how you can get monthly pension of Rs 7,500 by investing only Rs 25 per day
Experts say Rs 750 investment per month is quite easy to afford, but this habit of regular investment from the beginning is difficult to achieve
Sufficient money in retirement is an aspiration for all. So everyone has to plan early about retirement. Money9 offers a simple calculation that can lead to a monthly pension of around Rs 7,500 by investing only Rs 25 per day. If you are a bit optimistic and have the appetite to take some risk, you might get a pension of Rs 9,800 per month or more.
We took the example of a person who is 25 and has just got a job. From the very first day he/she invests a very small amount of money, say Rs 25, it translates to Rs 750 investment per month.
If the person invests in traditional instruments such as national pension system (NPS) for a period of 35 years, (60 years – 25 years = 35 years) then it will give the individual a monthly amount of around Rs 7,500 along with a one-time pay of Rs 22.4 lakh.
The math
We considered traditional pension instruments such as NPS and the investment pattern is a bit conservative. So, 50% of the total corpus would be invested in equities and the rest in government and corporate bonds.
This investment pattern would yield 11% yearly return. According to NPS calculator, Rs 750 investment per month for a period of 35 years would give the person an amount of Rs 37.4 lakh.
As per the rule of NPS, the person will get Rs 22.4 lakh at the age of 60 years and the rest Rs 15 lakh would be paid as annuities.
At 6% annuity rate, the person would get Rs 7,470 pension per month till the end of his/her life.
If the person wishes to take a bit more risk, like 75% investment in equity segment, then we can consider minimum 12% yearly return.
In that scenario the total corpus would be Rs 49 lakh, of which Rs 30 lakh would be paid at the time of retirement. And the rest Rs 19 lakh would be paid as the monthly pension, which turns into Rs 9,750 per month.
Bottom line
Experts say Rs 750 investment per month is quite easy to afford, but this habit of regular investment from the beginning is difficult to achieve.
They also suggest that if anyone wants to invest any other instruments like PPF or MF then the person might get secure return but pension facility is available only in NPS.