National Pension Scheme: Turn Rs 5,000 monthly contributions into a Rs 45,000 pension

To ensure your wife remains financially independent in the future, consider setting up a regular income stream for her. One effective way is to open a New Pension System (NPS) account in her name. This account will provide her with a lump sum payment when she turns 60, and you'll also receive monthly pension benefits.

One of the greatest benefits of an NPS account is the flexibility it offers in determining your monthly pension amount. By opening an NPS account in your wife's name, you can ensure she will have a steady income and no financial shortfalls when she turns 60. You can start an NPS account for as little as Rs 1,000.

Under the new regulations, you have the option to extend the NPS account until your wife turns 65. For instance, if your wife is currently 30 years old and you invest Rs 5,000 monthly in her NPS account, with an annual return of 10%, the total corpus could grow to approximately Rs 1.12 crore.

Upon reaching retirement, she will receive a lifelong pension. Here’s a breakdown of the investment details:

Starting Age: 30 years
Investment Duration: 30 years
Monthly Contribution: Rs 5,000
Estimated Annual Return: 10%
Total Pension Fund at Maturity: Rs 1,11,98,471
Amount Available for Withdrawal at Maturity: Rs 44,79,388
Amount to Purchase an Annuity Plan: Rs 67,19,083
Estimated Annual Interest Rate on Annuity: 8%
Estimated Monthly Pension: Rs 44,793

NPS is a government-backed social security scheme managed by professional fund managers appointed by the Central Government. These experts handle your investments to ensure optimal growth. Since its inception, the NPS has consistently provided average annual returns of 10 to 11 percent.

National Pension System (NPS) provides significant tax benefits, including exemptions of up to Rs 2 lakh on contributions. Additionally, you can enjoy tax-free withdrawals of up to 60% of the accumulated amount at retirement. Beyond the standard Rs 1.5 lakh exemption limit, NPS allows for an extra tax deduction of Rs 50,000. This means you can potentially save up to Rs 2 lakh in taxes annually through NPS.