How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
As the saying goes, “it’s never too late to start.” This adage holds particularly true 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 uncommon for people to begin thinking about their post-work life in their 40s. With 20 years to go before reaching the typical retirement age of 60, individuals in this age group can still build a substantial corpus to ensure a comfortable post-work life. But how much do they need to invest, and what returns can they expect?
According to a report by NDTV Profit, a person aged 40 can build a retirement corpus of ₹5 crore by investing ₹55,000 in a monthly Systematic Investment Plan (SIP) for 20 years, assuming an expected rate of return of 12%. This calculation is based on the assumption that the individual will retire at the age of 60, which is 20 years from the starting point of their investment journey.
To break it down further, let’s consider the power of compounding. When you invest in a SIP, you’re essentially putting a fixed amount of money into a investment vehicle, such as a mutual fund, at regular intervals. Over time, the returns on your investment earn returns of their own, leading to exponential growth. In this case, the ₹55,000 monthly SIP, combined with the 12% expected rate of return, can help the individual build a corpus of ₹5 crore over 20 years.
But what if the individual wants to build an even larger corpus, say ₹6 crore? According to the same report, they would need to invest ₹65,000 monthly in a SIP at the same 12% expected rate of return. This increased investment amount can help them reach their goal of building a larger retirement corpus.
It’s worth noting that these calculations are based on certain assumptions, such as the expected rate of return and the time horizon. In reality, market returns can fluctuate, and there may be periods of high growth as well as downturns. However, by starting early and being consistent with their investments, individuals can reduce their risk and increase their chances of reaching their retirement goals.
So, what can individuals do to build a ₹5-6 crore corpus for retirement if they begin investing at 40? Here are a few tips:
- Start with a clear goal: Define your retirement goals and estimate how much you’ll need to maintain your standard of living post-work. Consider factors such as inflation, healthcare costs, and travel expenses.
- Choose the right investment vehicle: Consider investing in a tax-efficient vehicle, such as a mutual fund or a National Pension System (NPS) account. These options can provide a range of investment choices and help you save on taxes.
- Be consistent: Invest a fixed amount regularly, either monthly or quarterly, to take advantage of the power of compounding.
- Monitor and adjust: Keep track of your investments and adjust your portfolio as needed to ensure you’re on track to meet your goals.
- 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 ₹5-6 crore corpus for retirement is achievable, even if you start investing at 40. By investing ₹55,000 to ₹65,000 monthly in a SIP at a 12% expected rate of return, individuals can create a substantial corpus to support their post-work life. Remember to start with a clear goal, choose the right investment vehicle, be consistent, monitor and adjust, and consider professional advice to help you achieve your retirement goals.
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