How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
As the old adage goes, “it’s never too late to start.” This couldn’t be truer when it comes to planning for retirement. While it’s ideal to start saving and investing for retirement from an early age, it’s not impossible to build a substantial corpus even if you begin investing at 40. In this blog post, we’ll explore how individuals can create a retirement corpus of ₹5-6 crore if they start investing at the age of 40.
First and foremost, it’s essential to understand the importance of starting early, even if it’s not as early as one would like. With 20 years to go before retirement, assuming a retirement age of 60, there’s still sufficient time to build a substantial corpus. However, it requires discipline, patience, and a well-thought-out investment strategy.
According to a report by NDTV Profit, a person aged 40 should invest ₹55,000 in a monthly Systematic Investment Plan (SIP) for 20 years at an expected rate of return of 12% 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 might seem daunting, but they’re achievable with a solid investment plan and a commitment to sticking to it.
So, how can individuals go about building this corpus? Here are some steps to consider:
- Start with a comprehensive financial plan: Before investing, it’s crucial to assess your current financial situation, including your income, expenses, debts, and existing savings. This will help you determine how much you can afford to invest each month.
- Choose the right investment options: With a long-term horizon of 20 years, equity investments are an excellent option. They offer the potential for higher returns over the long term, which can help you build a substantial corpus. You can consider investing in a mix of low-cost index funds, actively managed equity funds, or a combination of both.
- Be consistent with your SIPs: Investing a fixed amount of money at regular intervals, regardless of the market’s performance, can help you ride out market volatility and avoid timing risks. This approach also helps you take advantage of rupee cost averaging, where you buy more units when the market is low and fewer units when the market is high.
- Monitor and adjust your portfolio: As you progress on your investment journey, it’s essential to monitor your portfolio’s performance and rebalance it periodically to ensure it remains aligned with your investment objectives and risk tolerance.
- Avoid dipping into your investments: It’s crucial to treat your retirement corpus as a sacrosanct fund and avoid withdrawing from it until you actually retire. This will help you avoid disrupting the compounding process and ensure that your investments continue to grow over time.
In addition to these steps, it’s also important to consider the power of compounding. When you invest regularly over a long period, your investments can grow significantly, thanks to the compounding effect. This is because the returns you earn on your investments are reinvested, generating even higher returns over time.
For example, if you invest ₹55,000 per month for 20 years at an expected rate of return of 12%, your total investment would be approximately ₹13.2 lakhs (₹55,000 x 12 x 20). However, thanks to the compounding effect, your corpus could grow to around ₹5 crore, assuming an annual return of 12%.
In conclusion, building a retirement corpus of ₹5-6 crore is achievable even if you start investing at 40. It requires discipline, patience, and a well-thought-out investment strategy. By starting with a comprehensive financial plan, choosing the right investment options, being consistent with your SIPs, monitoring and adjusting your portfolio, and avoiding dipping into your investments, you can create a substantial corpus to support your retirement goals.
Remember, it’s never too late to start, and the power of compounding can work in your favor if you give your investments sufficient time to grow. So, take the first step today and start building your retirement corpus.
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