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A monthly pension payment gives you a fixed amount every month over your whole life, so you don't have to worry about changes in the stock market. In contrast, a lump-sum payout can give you the flexibility of choosing where to invest or save your money, and when and how much to withdraw.

If you start contributing to your NPS account at the age 40 and retire at 60, your total investment tenure would be 20 years. To receive a monthly pension of Rs 50,000 post-retirement, you need to invest Rs 33,000 monthly for 20 years. This totals to an investment of Rs 79.2 lakh.

Maximum limit on pension is 50% of the highest pay in the Government of India (presently Rs. 1,25,000) per month. Pension is payable up to and including the date of death.

We can also give an example: As an investor, you can start with the monthly contribution of INR 15000 per month with equity debt exposure to and buying annuity of at least 60 of the net NPS maturity amount. This can give you a monthly pension of 1 Lakh.

To get a pension of Rs 2 lakh per month, the total accumulated NPS corpus must be Rs 4.02 crore on maturity (i.e., age of 60 years) if we assume that the overall corpus will be able to generate 6% overall return after 20 years. It is mandatory to buy a 40% annuity.

You can: take a pension annuity and receiving a monthly check; or, if your employer allows, take a lump-sum distribution, which you will need to invest and manage: lump sums can be rolled into an IRA, where you are taxed only on money you decide to take out.

For example, if an investor wants Rs. 30,000 pension per month, they need to invest approximately Rs. 5,000 per month for around 10 ? 15 years. Tax deductions: If an investor does not plan their investments properly, a huge amount of their savings can go into the income tax.