How to Calculate Your Retirement Corpus Using an NPS Calculator

Author : Rahul Agnihotri | Published On : 12 Feb 2024

How to Calculate Your Retirement Corpus Using an NPS Calculator 


Today, in India, you have different investment options to suit your and with varying degrees of risk and returns potential. One such popular investment option is NPS or National Pension System. 


It is a long-term investment option offered by the government of India wherein you contribute a small amount towards your pension fund throughout your working years, and once you retire, i.e., after you reach 60 years, you can buy an annuity and get a regular income in the form of pension. 


Previously known as the National Pension Scheme, it is one of the best investment options in India to invest in to secure your life after retirement. One of the significant features that distinguishes NPS from other retirement plans in India is that it offers inflation-adjusted returns. 


The money you contribute towards your NPS account is invested in different market-linked instruments to generate high returns for you. The best part is you can decide where and how much you want to invest in different instruments. And more importantly, you don’t have to make any investment decisions, a professional fund manager will manage the investments on your behalf and invest based on your risk-taking capacity and long-term goals. 


While it is a known fact that NPS offers valuable returns, as an investor, you would know the exact returns you can get from your investment and how much corpus you can build. This is where the NPS calculator plays a significant role. It is an easy-to-use online tool that allows you to compute the returns simply by entering a few basic details. 


Let us know more about how to use the NPS calculator.


How can an NPS calculator help you in computing the retirement corpus?


  • The NPS calculator is a wonderful tool that you must use to know the exact amount of money you are entitled to receive at the end of the NPS investment tenure. 


  • As per the existing NPS rules, you cannot withdraw the entire amount at the end of the investment period. In fact, the rules allow you to withdraw only a maximum of 40% of the accumulated corpus when you reach the retirement age. You must use the 60% amount in your pension fund account to purchase annuity, and it is subject to taxation. By using the NPS calculator, you can know all these details in detail. 


  • Another significant benefit of using the NPS calculator is that it gives you accurate results. And, you can avoid the risk of miscalculation involved with manual calculation. This wonderful tool uses an advanced system to do the calculations and gives you precise results that helps in your financial planning


  • Lastly, apart from computing the exact returns you can get and the corpus you can accumulate, NPS calculators also know how much money you have to spend every month to create a corpus that you want and the pension amount you receive at the end of every month. 


Formula for calculating the pension amount


The National Pension System uses the following formula to compute the pension amount:


A = P (1 + r/n) ^ nt


In the above formula, 


  • A is the amount that you are liable to receive and the rest of the components are variables.

  • P is the principal amount

  • R is the interest you earn and it is calculated on per annum basis 

  • N is the number of interest compound 

  • T is the total investment tenure


How to use an NPS calculator?


Now that you know what NPS is, how the NPS calculator helps you in computing the corpus, and the formula for calculating the pension amount, it would help to know how to use this wonderful online tool. 


Firstly, you must know that using the NPS calculator is easy. You need not be a technical expert or have prior experience to use it. Typically, these calculators have a very user-friendly interface and just follow the below steps:


  • Step 1 – Enter the amount you want to invest every month towards your retirement corpus or pension fund 


  • Step 2 – Enter your present age


  • Step 3 – Enter expected rate of returns. Some calculator may require you to adjust the slider to enter the expected returns


Once you enter all the details, simply enter the calculate button, and the tool will showcase the results within seconds. 


Final Word


NPS is an excellent investment option for you to build a sizable corpus for our future and secure your life after retirement financially. By using the NPS calculator you can make informed investment decisions.