How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
As the age-old adage goes, “it’s never too late to start.” This holds particularly true when it comes to planning for retirement. Many individuals often find themselves wondering if they have left it too late to start building a substantial retirement corpus, especially if they are approaching their 40s. However, with a well-thought-out strategy and disciplined investing, it is entirely possible to accumulate a significant amount of wealth, even if one begins investing at the age of 40.
Considering the retirement age to be 60, a person aged 40 has approximately 20 years to build a retirement corpus. According to a recent report by NDTV Profit, to build a retirement corpus of ₹5 crore, a person should invest ₹55,000 in a monthly Systematic Investment Plan (SIP) for 20 years, assuming an expected rate of return of 12%. This may seem like a daunting task, but it is achievable with a solid plan and consistent investing.
To break it down further, let’s consider the power of compounding. When you invest a fixed amount of money at regular intervals, it has the potential to grow exponentially over time, thanks to the magic of compounding. In this scenario, the monthly SIP of ₹55,000, invested over 20 years, can potentially yield a corpus of ₹5 crore, assuming a 12% rate of return. This is a substantial amount that can provide a comfortable retirement for most individuals.
However, for those who aspire to build an even larger retirement corpus, the investment amount would need to be higher. To build a retirement corpus of ₹6 crore, a person would need to invest ₹65,000 monthly in SIP at 12% return, according to the same report. This may require some adjustments to one’s lifestyle and budget, but the end result can be well worth the sacrifice.
It’s essential to note that these calculations are based on certain assumptions, including the expected rate of return and the time horizon. In reality, the actual returns may vary, and it’s crucial to review and adjust one’s investment strategy periodically to ensure that it remains on track to meet the desired goals.
So, how can individuals begin building their retirement corpus, especially if they are starting from scratch at the age of 40? Here are a few tips:
- Start with a solid plan: Begin by assessing your current financial situation, including your income, expenses, assets, and liabilities. Then, set clear retirement goals, including the amount you want to accumulate and the time frame in which you want to achieve it.
- Choose the right investments: Consider a mix of low-risk and high-risk investments, such as mutual funds, stocks, and bonds, to create a diversified portfolio. It’s also essential to consider your risk tolerance and adjust your investments accordingly.
- Invest consistently: Set up a systematic investment plan, where you invest a fixed amount of money at regular intervals, to take advantage of the power of compounding.
- Monitor and adjust: Regularly review your investment portfolio and adjust your strategy as needed to ensure that you are on track to meet your retirement goals.
- Avoid unnecessary expenses: Be mindful of your expenses and avoid unnecessary spending to free up more money for investments.
- Consider professional advice: If you’re new to investing or unsure about how to get started, consider consulting a financial advisor who can help you create a personalized retirement plan.
In conclusion, building a retirement corpus of ₹5-6 crore is achievable, even if one begins investing at the age of 40. It requires discipline, patience, and a well-thought-out strategy, but the end result can be well worth the effort. By starting early, investing consistently, and monitoring one’s progress, individuals can create a comfortable and secure retirement for themselves.
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