Invest in a Monthly Pension Scheme in Your 20s

Everyone wants to secure their future. Do you know the best way of doing it? Investing. Keeping aside a small amount of money every month from your salary is the best way to secure your future. It is recommended to start saving this amount right from the year you start earning; in fact, it is most promising to invest in any monthly pension scheme.

When you are in your 20s, retirement looks so far that you don’t even think about it. Any person close to the retirement age or has retired will tell you how quickly time passes by. If you do not start early, it might become difficult for you to save enough money to lead a comfortable life after your retirement.

The major benefit of starting a monthly pension plan early is that you get a lot of time to save, and you can use this money to pay off any expenses you want in the future or for retirement or going on a world tour with your partner. If you invest in your 20s, you will get more time to grow or multiply your wealth, and thus you will be in a better position to accomplish all your financial goals seamlessly.

What are Pension Funds?

Before getting insights into the best monthly pension scheme, let us first understand what pension funds and their usage are. Pension schemes are financial tools that aid you in collecting funds for post-retirement. In the monthly pension scheme, you need to invest a specific amount regularly; this way, you will be able to accumulate a considerable sum by the time the scheme ends.

There are two stages involved in a monthly pension scheme:

1. Accumulation stage: You will need to pay a regular amount monthly or quarterly towards the scheme
2. Vesting stage: As you retire, a huge sum is available to make your retirement hassle-free and smooth.

But, to save a hefty amount for retirement, you need to start investing in a monthly pension plan from your 20s only. Do not wait for you to cross 40 before you begin investing. Make a plan and start investing timely to secure your future or old age.

Key Takeaways

• It is relatively easy to start investing or saving for retirement when you’re in your 20s, as at that time, you may have fewer responsibilities. But it is important for you to create a retirement plan in advance; if you don’t have any idea, contact an investment advisor; he can help prioritize your goals.
• Initially, you can start investing a small amount in the monthly pension scheme, and as the salary increases, you can keep adding on to it over time. This will help reduce the burden initially when your salary is less, and as the salary increases, you can add on to it.

Did you know?

The best monthly pension schemes – National Pension System (NPS) and Atal Pension Yojana (APY) – at April-end 2022, had a total asset under management of Rs. 7,38,765 crore, which has increased by 25.25% as compared to the previous year.

Types of Monthly Pension Scheme

Here are some of the best monthly pension schemes for you to choose from:

1. PM Monthly Pension Scheme

This plan was founded by the government of India and is also called Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM). This is for people who have a salary of Rs. 15000 or less and are 18-40 years of age. The government started it especially for unorganized workers to ensure their old-age protection.

They have to pay a fixed monthly amount, and the government will also contribute equally, and after they reach 60, they will get Rs. 3000 every month till they are alive. In case they die before retirement, the amount will be given to the spouse.

Contribution table

Entry Age	Superannuation Age	Member’s  monthly contribution (Rs)	Central Govt’s  monthly contribution (Rs)	Total monthly contribution  (Rs)
(1)	(2)	(3)	(4)	(5)= (3)+(4)
18	60	55	55	110
19	60	58	58	116
20	60	61	61	122
21	60	64	64	128
22	60	68	68	136
23	60	72	72	144
24	60	76	76	152
25	60	80	80	160
26	60	85	85	170
27	60	90	90	180
28	60	95	95	190
29	60	100	100	200
30	60	105	105	210
31	60	110	110	220
32	60	120	120	240
33	60	130	130	260
34	60	140	140	280
35	60	150	150	300
36	60	160	160	320
37	60	170	170	340
38	60	180	180	360
39	60	190	190	380
40	60	200	200	400

2. Atal Pension Yojana (APY)

This is one of the best PM monthly pension schemes and is also called the 1000 monthly pension scheme. Anyone with an active bank account and between the age of 18 to 40 is eligible for it. They can choose the contribution amount as per their salary, and after retirement, they will get a minimum amount of Rs. 1000, Rs. 2000, Rs. 4000 and Rs. 5000 a month. The return will depend on the age when you start investing and the amount you contribute.

This amount will be given to the subscriber; in case he dies, the amount will be given to their spouse. In case of the early death of the subscriber, the partner also has the choice to resume with this monthly pension scheme.

Contribution table

Age at Entry (Years)	Total Years of Contribution	Required Monthly Contribution Amount
Monthly Pension of Rs. 1000	Monthly Pension of Rs. 2000	Monthly Pension of Rs. 3000	Monthly Pension of Rs. 4000	Monthly Pension of Rs. 5000
18	42	42	84	126	168	210
19	41	46	92	138	183	228
20	40	50	100	150	198	248
21	39	54	108	162	215	269
22	38	59	117	177	234	292
23	37	64	127	192	254	318
24	36	70	139	208	277	346
25	35	76	151	226	301	376
26	34	82	164	246	327	409
27	33	90	178	268	356	446
28	32	97	194	292	388	485
29	31	106	212	318	423	529
30	30	116	231	347	462	577
31	29	126	252	379	504	630
32	28	138	276	414	551	689
33	27	151	302	453	602	752
34	26	165	330	495	659	824
35	25	181	362	543	722	902
36	24	198	396	594	792	990
37	23	218	436	654	870	1087
38	22	240	480	720	957	1196
39	21	264	528	792	1054	1318
40	20	291	582	873	1164	1454

Did you know?

If we talk individually about Atal Pension Yojana, over 28 lakh fresh accounts were opened during FY 2021-22. Their enrolments under APY have crossed Rs. 3.30 crore as of 25th August 2021.

Word to Remember

Compound Interest: It is important to know well about this term if you plan to invest in any monthly pension plan. Compound interest is the process through which your money multiplies quickly because of the interest increasing upon itself over time. Usually, all the monthly pension schemes use compound interest for calculating the interest.

Let us understand the concept of compound interest with the help of an example. If you invest Rs. 5000 in a pension scheme that gets you the return of 2% interest annually, at the end of the first year, your investment will increase by Rs. 100, i.e., 2% of 5000. This means your investment of Rs. 5000 has risen to Rs. 5100. Consequently, the next year you will get 2% of Rs. 5100, and so on.

Conclusion

There are various benefits of investing in a monthly pension scheme in your 20s. It inculcates a savings habit; you gain a lot from compound interest, secure your retirement, and safeguard the future of your loved ones. But, it is always recommended first to create your financial goals so that you can plan your investments accordingly.

Therefore, if you plan to invest in a monthly pension plan in your 20s, you should not forget to focus on first creating a budget. You should first save some money for emergency purposes, and after that, plan investments in the budget.

FAQs

Read more about Government Pension Scheme.