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The National Pension System (NPS) is a government-backed retirement plan that has gained popularity among Indian employees and investors for its flexibility, tax benefits, and long-term returns. While many NPS account holders target retirement funds by age 60, there’s an alternative approach to enhance your retirement income: simply extend your NPS maturity age by two years. This slight adjustment can increase your pension by up to 22% and significantly boost your retirement corpus, making it an appealing option for those planning for a financially secure retirement.
Typically, NPS subscribers aim to keep their accounts active until they reach 60, then start withdrawing their pension. However, according to NPS calculators, extending your plan to 62 or 64 years can substantially increase both monthly pension payouts and overall corpus. For example, letting the NPS mature at 62 instead of 60 years increases the pension by around 22%. Extending it further to 64 years leads to a similar 22% boost, compounding the gains for retirees.
While this strategy requires other sources of income beyond 60 to cover living expenses, the long-term benefits make it worth considering, especially for those looking to maximize their retirement savings.
NPS is open to Indian citizens aged 18-70 and includes both government and private-sector employees. Non-resident Indians (NRIs) can also invest in the scheme, adding to its accessibility. Once an account is opened, contributions are made regularly until the selected maturity age (between 60 to 75 years). NPS has a history of providing 8% to 12% returns annually, which adds to its appeal as a retirement solution.
Here’s a comparison of NPS outcomes when maturing at 60 and 62 years, illustrating how extending the investment period can lead to a higher monthly pension and corpus.
Outcome at 60 Years:
Outcome at 62 Years:
By extending the plan by two years, the monthly pension rises from ₹44,663 to ₹54,818—an increase of 22%. If extended to 64 years, the monthly payout would further increase to around ₹67,210, following a similar 22% upward trend.
NPS not only promises attractive returns but also comes with considerable tax savings under the Income Tax Act, 1961:
Together, these tax benefits allow an individual to claim deductions of up to ₹2 lakh each financial year through NPS contributions, helping to reduce taxable income substantially.
Extending your NPS maturity by two years might require planning and financial discipline but offers benefits worth the effort. With potentially higher monthly pensions, a larger retirement corpus, and additional tax breaks, NPS provides a unique opportunity for retirees to boost financial security in later years. The flexibility to extend the maturity period ensures that subscribers can tailor their retirement plans to their needs and enjoy more stable post-retirement income.
Planning for the future is always beneficial, and by making informed decisions about your NPS investment timeline, you can maximize both income and security for your retirement years.
