How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
As we age, our priorities often shift from accumulating wealth to planning for a secure and comfortable retirement. For many, the thought of retirement can be daunting, especially if they haven’t started planning and investing early on. However, it’s never too late to start, and with a solid plan in place, it’s possible to build a substantial retirement corpus even if you begin investing at 40.
According to a report by NDTV Profit, considering the retirement age to be 60, a person aged 40 should invest ₹55,000 in a monthly SIP (Systematic Investment Plan) for 20 years at a 12% expected rate of return to build a retirement corpus of ₹5 crore. To build a retirement corpus of ₹6 crore, a person would need to invest ₹65,000 monthly in SIP at 12% return. These numbers may seem daunting, but with a clear understanding of the investment landscape and a well-thought-out plan, achieving these goals is definitely possible.
Understanding the Power of Compounding
One of the key factors that contribute to the growth of your investments is the power of compounding. Compounding is the process by which your investments earn returns on their returns, leading to exponential growth over time. The earlier you start investing, the more time your money has to grow, and the greater the impact of compounding will be.
In the case of the example mentioned above, the person investing ₹55,000 per month for 20 years will have invested a total of ₹1.32 crore (₹55,000 x 12 x 20). However, with an expected rate of return of 12%, their investment will grow to ₹5 crore, a staggering return of nearly 4 times their total investment. This is the power of compounding in action, and it highlights the importance of starting to invest as early as possible.
Investment Options for Retirement Planning
So, where should you invest your money to build a retirement corpus of ₹5-6 crore? There are several investment options available, each with its own set of advantages and risks. Some of the most popular options include:
- Equity Mutual Funds: These funds invest in stocks and offer the potential for high returns over the long term. They are a good option for those who are willing to take on some level of risk and have a time horizon of at least 5-7 years.
- Debt Mutual Funds: These funds invest in bonds and other debt securities and offer a relatively stable source of returns. They are a good option for those who are risk-averse and want to preserve their capital.
- Public Provident Fund (PPF): The PPF is a long-term investment option that offers a fixed rate of return and is backed by the government. It is a good option for those who want to save for retirement and also save on taxes.
- National Pension System (NPS): The NPS is a retirement savings scheme that offers a range of investment options and is designed to provide a steady income stream in retirement.
Creating a Retirement Plan
Building a retirement corpus of ₹5-6 crore requires a well-thought-out plan and discipline. Here are some steps you can take to create a retirement plan:
- Set clear goals: Determine how much you need to save for retirement and what your goals are.
- Assess your financial situation: Take stock of your income, expenses, assets, and debts to determine how much you can afford to invest.
- Choose your investments: Select a mix of investments that align with your risk tolerance and goals.
- Start investing: Begin investing regularly, either through a SIP or a lump sum investment.
- Monitor and adjust: Regularly review your investment portfolio and adjust your plan as needed.
Conclusion
Building a retirement corpus of ₹5-6 crore may seem like a daunting task, but it is achievable with a solid plan and discipline. By starting to invest at 40 and taking advantage of the power of compounding, you can create a substantial retirement corpus that will provide you with a comfortable and secure retirement. Remember to choose your investments wisely, create a plan, and stick to it. With patience and persistence, you can achieve your retirement goals and enjoy a happy and fulfilling post-work life.
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