How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
As we age, the importance of planning for retirement becomes increasingly evident. With the rising cost of living and ever-increasing life expectancy, it’s essential to build a substantial corpus to ensure a comfortable post-work life. However, many individuals often find themselves wondering how to accumulate such a large amount, especially if they start investing later in life. Recently, a report by NDTV Profit highlighted the importance of starting early and provided valuable insights on how to build a retirement corpus of ₹5-6 crore, even if one begins investing at the age of 40.
Considering the retirement age to be 60, a person aged 40 should invest ₹55,000 in a monthly Systematic Investment Plan (SIP) for 20 years at a 12% expected rate of return to build a retirement corpus of ₹5 crore, as reported by NDTV Profit. This calculation assumes a consistent investment amount and a steady return on investment over the two-decade period. Similarly, to build a retirement corpus of ₹6 crore, a person would need to invest ₹65,000 monthly in SIP at a 12% return. These figures may seem daunting, but they serve as a starting point for individuals to plan and work towards their retirement goals.
It’s essential to understand that building a substantial retirement corpus requires discipline, patience, and a well-thought-out investment strategy. Starting early, even if it’s at 40, can make a significant difference in the long run. The power of compounding, which refers to the growth of investments over time due to the reinvestment of dividends and interest, can work in favor of investors who start early. By giving their investments more time to grow, individuals can potentially accumulate a larger corpus, even with smaller monthly investments.
To put this into perspective, let’s consider the example of two individuals, both starting to invest at 40, but with different investment amounts and time horizons. Person A invests ₹50,000 per month for 20 years, earning an average annual return of 12%. Person B, on the other hand, invests ₹30,000 per month for 25 years, earning the same average annual return. Although Person B invests for a longer period, Person A’s larger monthly investment amount and disciplined approach can potentially result in a larger corpus at the end of the 20-year period.
In addition to starting early and investing consistently, it’s crucial to choose the right investment options to build a retirement corpus. A diversified portfolio that includes a mix of low-risk and high-risk investments can help balance returns and minimize potential losses. Some popular investment options for retirement planning include:
- Equity mutual funds: These funds invest in stocks and offer the potential for long-term growth.
- Debt mutual funds: These funds invest in bonds and other fixed-income securities, providing relatively stable returns.
- Public Provident Fund (PPF): A long-term savings instrument that offers tax benefits and a fixed rate of return.
- National Pension System (NPS): A retirement savings scheme that offers tax benefits and a range of investment options.
When selecting investment options, it’s essential to consider factors such as risk tolerance, investment horizon, and financial goals. A financial advisor or planner can help individuals create a personalized investment strategy that aligns with their retirement objectives.
In conclusion, building a retirement corpus of ₹5-6 crore is achievable, even if one starts investing at 40. By investing consistently, choosing the right investment options, and giving their investments time to grow, individuals can work towards securing a comfortable post-work life. It’s essential to remember that retirement planning is a long-term process that requires discipline, patience, and a well-thought-out strategy.
As highlighted in the report by NDTV Profit, starting early and investing consistently can make a significant difference in building a substantial retirement corpus. By following the calculations and guidelines outlined in the report, individuals can create a roadmap for their retirement planning and work towards achieving their financial goals.
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