How to Get a 1 Lakh Pension Per Month?

Securing a monthly pension of 1 Lakh is a financial aspiration shared by many individuals as they plan for retirement. However, achieving this goal requires diligent planning, strategic investment decisions, and a comprehensive understanding of various investment products available in the market.

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Investment Options for Building a Retirement Corpus

Achieving a monthly pension of ₹1 lakh requires disciplined planning and early action. Here are the 2 best options which can help you achieve this goal:

  1. NPS (National Pension System):

    • NPS is a voluntary defined contribution retirement scheme aimed at providing a steady income stream post-retirement.

    • It is designed to empower subscribers to make optimal decisions impacting their future through sustained savings during their working life.

    • The Pension Fund Regulatory & Development Authority (PFRDA) governs the scheme and invests in market-linked hybrid funds.

  2. NPS Account Structure:

    Tier-I Account:

    • Mandatory account where contributions accumulate, both from subscribers and employers.

    • Withdrawals are restricted until subscribers comply with NPS exit rules.

    • 40% of the corpus must be reinvested in an annuity, while the remaining 60% can be withdrawn tax-free.

    Tier-II Account:

    • Optional account allowing contributions at the subscriber's convenience.

    • No restrictions on withdrawals during the NPS tenure.

  3. Financial Planning for 1 Lac Pension:

    • Subscribers have the flexibility to choose investment products, such as allocating 60% in equity assets and 40% in debt.

    • This balanced mix yields approximately 10% returns.

    • Assuming a 30-year tenure, subscribers must contribute ₹15,000 monthly to attain a 1 lakh pension.

    • 60% of the retirement corpus is invested in an annuity, which returns 6% annually.

  4. Alternative Investment Scenario:

    • With a 20-year investment horizon, subscribers must invest ₹32,000 per month.

    • This assumes a 12% return rate to build a similar retirement corpus within a shorter time frame.

  5. SIPs (Systematic Investment Plans):

    • 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.

    • 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.

    • Systematic Investment Plans (SIPs) provide the most accessible pathway to reaching this financial milestone, offering affordability and sustainability over the long term.

    • SIPs offer multiple advantages, catering to investors of all sizes. With no upper limit, they are inclusive and well-suited for retirement planning.

    • Initiating an SIP requires a monthly investment of ₹500, available through both online and offline channels, enhancing accessibility for investors.

    • SIPs provide flexibility in asset allocation, allowing investors to transition between equity and debt asset classes seamlessly.

    • 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.

    • 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.

    • 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.

Other Investment Options That You Can Consider

  • Unit Linked Insurance Plans (ULIPs): Explore ULIPs that combine insurance coverage with investment opportunities in equity, debt, or hybrid funds, providing potential for growth along with life cover.

  • Pension Plans: Consider pension plans offered by insurance companies, which provide regular income post-retirement and often offer flexibility in contribution and payout options.

  • Capital Guarantee Plans: Invest in capital guarantee plans offered by financial institutions, which assure the return of your principal investment while also offering the possibility of earning returns linked to market performance.

  • Annuities: Opt for annuity plans from insurance companies, which provide a guaranteed monthly income in exchange for a lump sum investment.

  • Fixed Deposits (FDs) and Bonds: Allocate a portion of your savings to fixed deposits and bonds to ensure a stable and secure income during retirement.

  • Mutual Funds: Invest in mutual funds with a balanced portfolio of equity and debt instruments to generate steady returns over the long term.

How To Plan for Monthly Income After Retirement?

  • Assess the current financial situation, including expenses, savings, and investments.

  • Determine desired retirement lifestyle and estimate retirement expenses.

  • Explore retirement investment options such as ULIPs, pension plans, annuities, mutual funds, and real estate.

  • Consider factors like risk tolerance, time horizon, and inflation when selecting investment vehicles.

  • Aim to build a diversified portfolio that generates regular income while preserving capital.

  • Continuously monitor and adjust retirement plans as financial circumstances and goals evolve. 

  • Proactively plan and invest for retirement to ensure a steady stream of income during golden years.

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.

Frequently Asked Questions

  • Can I really get a Rs.1 lakh monthly pension?

    Yes, but it requires early planning, consistent saving, and potentially a high-risk tolerance.
  • What are the key strategies to achieve this?

    • Start early and invest consistently: Benefit from compounding interest.

    • Explore investment options: NPS, Mutual Funds (SIPs) with annuity plans.

    • Calculate required investment: Use online tools like SIP Calculator to estimate corpus needed.

    • Consider additional income streams: Part-time work, rental income.

    • Seek professional guidance: Consult a financial advisor for personalized planning.

  • What is the first step I should take?

    Research different retirement plans, understand their risks and benefits, and estimate the required monthly investment based on your goals.
  • Is there a guaranteed way to achieve this?

    No. Investment markets involve inherent risks, and returns cannot be guaranteed.
  • What if I'm already nearing retirement?

    It's still possible, but you'll likely need to invest more aggressively to reach your goal. Consulting a financial advisor is crucial in this scenario.
  • What is the tax savings quantum in NPS?

    You can save up to Rs 1.5 Lac in a financial year for your NPS contribution combined under Sections 80C and 80CCD of the IT Act, 1961. (*Tax benefit is subject to changes in tax laws. Standard T&C apply.)
  • What is the capital gains tax rate in equity funds?

    You are liable to pay long-term capital gains tax at 10% as you cross the Rs.1 Lac returns threshold from equity funds in a financial year.
  • Is your mutual fund investment eligible for tax deduction?

    Your investment in ELSS is eligible for tax deduction up to Rs.1.5 Lac under Section 80C of the IT Act, 1961. (*Tax benefit is subject to changes in tax laws. Standard T&C apply.)
  • Who is eligible to subscribe to the NPS?

    Any Indian citizen between 18 and 65 can subscribe to NPS, whether salaried or self-employed.
  • What is the minimum investment in the NPS accounts?

    You can open the Tier-I account with a minimum of Rs.500 and the Tier-II with Rs.1000. However, the subsequent minimum contributions are Rs.500 and Rs.250, respectively.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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