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. While it’s ideal to begin saving for retirement early on in one’s career, it’s not uncommon for individuals to start thinking about their post-work life in their 40s. With 20 years left before reaching the typical retirement age of 60, it’s still possible to build a substantial corpus for a comfortable post-work life. But how can one achieve this feat?
According to a recent report by NDTV Profit, a person aged 40 can build a retirement corpus of ₹5-6 crore by investing in a systematic investment plan (SIP) with a monthly contribution of ₹55,000-₹65,000, respectively, over a period of 20 years, assuming an expected rate of return of 12%. This may seem like a daunting task, but it’s essential to understand the power of compounding and the importance of starting early, even if it’s later than initially planned.
To break it down, let’s consider the numbers. For a person looking to build a ₹5 crore corpus, they would need to invest ₹55,000 every month for 20 years, earning an average annual return of 12%. This translates to a total investment of approximately ₹1.32 crore over the two-decade period. However, thanks to the magic of compounding, the corpus would grow to ₹5 crore by the time the individual reaches 60.
Similarly, for those aiming to accumulate a ₹6 crore corpus, the monthly SIP contribution would need to be ₹65,000, also over a 20-year period, at the same expected rate of return. In this scenario, the total investment would be around ₹1.56 crore, but the corpus would balloon to ₹6 crore by the time the individual retires.
It’s essential to note that these calculations are based on certain assumptions, including the expected rate of return and the consistency of monthly SIP contributions. In reality, market fluctuations and other factors may impact the actual performance of the investment. Nevertheless, this provides a general idea of the kind of disciplined investment approach required to build a substantial retirement corpus.
So, what can individuals do to increase their chances of achieving this goal? Firstly, it’s crucial to start as soon as possible, even if it’s at 40. The power of compounding can work in one’s favor, but only if given enough time to do so. Secondly, it’s essential to be consistent with SIP contributions, ensuring that the monthly investment is made without fail, regardless of market conditions.
Additionally, it’s vital to have a well-diversified investment portfolio, which can help mitigate risks and optimize returns. This may involve a mix of low-risk debt instruments, such as government bonds or fixed deposits, and higher-risk equity investments, such as stocks or mutual funds. A balanced portfolio can help reduce the overall risk profile while still providing the potential for long-term growth.
Another critical aspect is to avoid dipping into the retirement corpus for non-essential expenses. It’s tempting to use the accumulated funds for other purposes, such as buying a new car or financing a vacation. However, it’s essential to treat the retirement corpus as sacrosanct, allowing it to grow undisturbed over the years.
Lastly, it’s crucial to review and adjust the investment strategy periodically. As market conditions change and individual circumstances evolve, it may be necessary to rebalance the portfolio or adjust the SIP contributions. This can help ensure that the retirement corpus remains on track to meet the desired goal.
In conclusion, building a ₹5-6 crore corpus for retirement is achievable, even for those starting at 40. By adopting a disciplined investment approach, being consistent with SIP contributions, and maintaining a well-diversified portfolio, individuals can increase their chances of securing a comfortable post-work life. While it may require some sacrifices and adjustments along the way, the end result can be well worth the effort.
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