How the national pension scheme can be utilized for early retirement

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₹75,000-1 lakh, the retirement corpus required at age 50, on an inflation adjusted basis, would be ₹6-8 crore for a 35-year old. For this, the individual will need to invest ₹1.5- 2 lakh per month assuming return on investment of 10% per annum (p.a,). The amount to be invested if the individual wants to play safe and invest at 8% p.a.

will be ₹2.5 lakh per month. Clearly, one needs to go beyond traditional investments to be able to reach the target. In order to retire at 50, individuals need to assess their ability to invest such an amount and the options that can generate a 10% p.a.

return. Equity mutual funds, NPS (active equity) and annuity schemes from insurance companies are the options which can be considered for an expected (but not guaranteed) 10% p.a. return.

Annuity schemes as explained earlier are an easy choice since investors look at them as defined benefit plans. However, this is not so. The returns in insurance promoted annuity plans are not fixed and the returns during the accumulation phase(i.e.

the period till retirement) could be low due to the high costs associated. The NPS, while locked in till age 60, does have a premature withdrawal option which allows subscribers to prematurely exit the scheme, subject to their being invested in it for at least five years. So, persons wanting to retire at 50 can withdraw 20% of the accumulated corpus, tax free, and an annuity needs to be purchased with the balance 80%.

Subscribers also have the option to continue with the NPS by paying the minimum subscription amount every year and start the annuity at the age of 60. The advantage there is that, at this point of time, 60% of the corpus can be withdrawn tax free and 40% goes into an annuity. A new feature in NPS