Why Starting Early with NPS to Increase Investment Returns

NPS rewards patience and discipline. Even small contributions made early can grow significantly over time. By starting your NPS journey early, you can leverage the full potential of compound interest, which can turn small regular investments into substantial retirement savings. In this article, we'll explore how starting early with NPS can grow your wealth and enhance financial security.

The impact of starting early

To understand the remarkable benefits of starting early with the National Pension Scheme (NPS), let's delve into the investment journeys of two individuals, Prasad and Vishal:

Suppose the assumed annual returns for NPS is 12%.

Prasad's Journey – "The Early Bird"

Age at Start: 25

Monthly Investment: Rs. 5,000

Vishal's Journey – "Better Late Than Never"

Age at Start: 35

Monthly Investment: Rs. 10,000

Both Prasad and Vishal plan to retire at the age of 60. However, their different approaches to investing in NPS reveal the power of starting early.

Prasad started his investment at age 25 and contributed Rs. 5,000 per month for the next 35 years (up to 60). For these 35 years, Prasad's total contribution to NPS amounted to Rs. 21 lakhs. At maturity, his total corpus is valued at Rs. 3.25 crores, with a total gain of Rs. 3.04 crores.

On the other hand, Vishal started investing at age 35 and contributed Rs. 10,000 per month for the next 25 years (up to the age of 60). For these 25 years, Vishal's total contribution stood at Rs. 30 lakhs. At maturity, his total corpus is valued at Rs. 1.9 crore, with a total gain of Rs. 1.6 crore.

This shows that despite Vishal investing twice as much each month as Prasad, Prasad's corpus is approximately 1.7 times larger. This is because the additional 10 years of growth allowed Prasad's investment to benefit significantly from compounding, doubling his retirement corpus despite a lower monthly investment.

Starting early reduced Prasad's monthly commitment and provided him with greater financial security and peace of mind. With a larger retirement corpus, Prasad can confidently approach retirement, knowing he has a robust financial cushion.

On the other hand, Vishal will struggle to catch up and may experience more stress about his financial future despite making significant contributions.

Additional Read: Difference Between Retail and Corporate NPS

The end note

The comparison between Prasad and Vishal clearly highlights the power of starting early with NPS. Although Prasad began investing with a lower monthly contribution at age 25, his retirement corpus was significantly larger than Vishal, who started at 35 with a higher monthly investment.

Starting early not only enables you to invest less each month but also allows you to leverage the power of compounding to grow your wealth over time. So, don't wait to secure your financial future. Remember, the earlier you start, the more you benefit.

Start your NPS journey today and take the first step towards a financially secure retirement.