How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
Retirement planning is a crucial aspect of an individual’s financial journey. It’s essential to start planning and investing early to ensure a comfortable and secure post-work life. However, for those who start investing later, it’s not too late to build a substantial retirement corpus. A recent report by NDTV Profit highlights the importance of starting to invest at the age of 40 to accumulate a significant amount for retirement.
Considering the retirement age to be 60, a person aged 40 should invest ₹55,000 in a monthly Systematic Investment Plan (SIP) for 20 years at a 12% expected rate of return to build a retirement corpus of ₹5 crore. This amount may seem substantial, but it’s essential to consider the power of compounding and the impact of consistent investing over a long period.
To build a retirement corpus of ₹6 crore, a person would need to invest ₹65,000 monthly in SIP at a 12% return. This highlights the importance of increasing the investment amount to achieve a higher corpus. The report emphasizes the need for individuals to start investing early and consistently to achieve their retirement goals.
It’s essential to note that the expected rate of return plays a significant role in determining the retirement corpus. A 12% return is considered a relatively conservative estimate, and actual returns may vary depending on the investment options and market conditions. Therefore, it’s crucial to diversify investments and review the portfolio regularly to ensure it’s aligned with the retirement goals.
For individuals who start investing at 40, it’s essential to consider their current financial situation, expenses, and income to determine the optimal investment amount. A thorough analysis of their financial health will help them create a tailored investment plan that suits their needs and goals.
One of the most critical aspects of retirement planning is to start early and be consistent. Investing a fixed amount regularly, regardless of the market conditions, can help individuals benefit from the power of compounding. It’s also essential to avoid withdrawing from the investments, as it can significantly impact the corpus.
In addition to investing in SIPs, individuals can also consider other investment options, such as Public Provident Fund (PPF), National Pension System (NPS), and mutual funds. These options offer a range of benefits, including tax advantages, flexibility, and diversification.
To illustrate the importance of starting early, let’s consider an example. Suppose two individuals, A and B, start investing at different ages. A starts investing ₹50,000 per month at the age of 30, while B starts investing the same amount at 40. Assuming a 12% return, A’s investment will grow to approximately ₹10 crore by the time they reach 60, while B’s investment will grow to around ₹5 crore. This example highlights the significant impact of starting early and the power of compounding.
In conclusion, building a retirement corpus of ₹5-6 crore is achievable, even if an individual starts investing at 40. It’s essential to start early, invest consistently, and review the portfolio regularly to ensure it’s aligned with the retirement goals. By following a disciplined investment approach and considering various investment options, individuals can create a substantial retirement corpus and enjoy a comfortable post-work life.
About the Author
