How can people build ₹5-6 crore corpus for retirement if they begin investing at 40
As the popular adage goes, “it’s never too late to start.” However, when it comes to building a retirement corpus, the earlier you start, the better. But what if you’re 40 years old and just beginning to think about your retirement savings? Is it still possible to build a substantial corpus, say ₹5-6 crore, by the time you retire at 60? The answer is yes, but it requires discipline, patience, and a well-thought-out investment strategy.
According to a recent 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%. To build a corpus of ₹6 crore, the monthly SIP investment would need to be ₹65,000 at the same expected rate of return.
These numbers may seem daunting, but they’re achievable if you start early and stay committed to your investment plan. In this blog post, we’ll explore how you can build a ₹5-6 crore corpus for retirement if you begin investing at 40.
Understanding the Power of Compounding
The key to building a substantial retirement corpus is to harness the power of compounding. Compounding is the process of earning interest on interest, which can help your investments grow exponentially over time. The earlier you start investing, the more time your money has to grow, and the less you’ll need to invest each month to reach your goal.
For example, let’s say you start investing ₹55,000 per month at 40, with an expected rate of return of 12%. After 20 years, your total investment would be approximately ₹13.2 lakh (₹55,000 x 12 x 20). However, due to the power of compounding, your corpus would have grown to around ₹5 crore, assuming the expected rate of return is achieved.
Investment Options for Building a Retirement Corpus
So, where should you invest your money to build a ₹5-6 crore corpus for retirement? There are several investment options to consider, each with its own pros and cons. Some popular options include:
- Equity Mutual Funds: These funds invest in stocks and offer the potential for high returns over the long term. However, they come with higher risks, and it’s essential to have a long-term perspective to ride out market fluctuations.
- National Pension System (NPS): The NPS is a government-backed retirement savings scheme that offers tax benefits and a range of investment options. It’s a good option for those who want to save for retirement and also benefit from tax deductions.
- Public Provident Fund (PPF): The PPF is a long-term savings scheme that offers a fixed rate of return and tax benefits. It’s a low-risk option, but the returns may not be as high as those from equity mutual funds.
- Real Estate: Investing in real estate can provide a steady income stream and potentially high returns over the long term. However, it requires a significant upfront investment and comes with its own set of risks, such as market fluctuations and property management issues.
Tips for Building a ₹5-6 Crore Corpus for Retirement
While investing ₹55,000-₹65,000 per month in a SIP may seem challenging, there are several tips to help you achieve your goal:
- Start early: The sooner you start investing, the more time your money has to grow.
- Be consistent: Invest a fixed amount regularly, and avoid missing payments.
- Diversify your portfolio: Spread your investments across different asset classes to minimize risk and maximize returns.
- Monitor and adjust: Regularly review your investment portfolio and adjust your strategy as needed to ensure you’re on track to meet your goal.
- Avoid lifestyle inflation: As your income increases, avoid the temptation to inflate your lifestyle by spending more on luxuries. Instead, direct excess funds towards your retirement savings.
Conclusion
Building a ₹5-6 crore corpus for retirement may seem like a daunting task, especially if you’re starting at 40. However, with discipline, patience, and a well-thought-out investment strategy, it’s achievable. By harnessing the power of compounding, investing in a mix of asset classes, and staying committed to your plan, you can create a substantial retirement corpus that will provide you with financial security and peace of mind in your golden years.
Remember, it’s never too late to start, and every small step counts. So, take the first step today, and start building your retirement corpus.
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