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:
- Accumulation stage: You will need to pay a regular amount monthly or quarterly towards the scheme
- 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.
- 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.
|Entry Age||Superannuation Age||Member’s monthly contribution (Rs)||Central Govt’s monthly contribution (Rs)||Total monthly contribution (Rs)|
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.
|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|
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.
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.
It is recommended to create a portfolio, mention various schemes, and then analyze the risks involved. See the one with less risk and better return and opt for it. If you have any confusion, you should always seek expert advice.
If you want to save more, you will have to invest more. Therefore, do not just rely upon your 9 to 5 jobs; instead, look for some side hustle to make more money.
Some of the best pension schemes are National Pension Scheme, Public Provident Fund, Employee Provident Fund and annuity plans with life cover.
There are three main factors: investment amount, tenure and investment product to be used.
You can invest in SIP in a mutual fund as it simplifies the investing process.
Read more about Government Pension Scheme.