Retirement Planning: Retirement planning is crucial for everyone since it enables people to live their lives as they see fit. For the purpose of building a retirement corpus, they can invest once or repeatedly. What happens if they want to set up a Rs 1.5 crore retirement corpus? Can they achieve this with a one-time investment of Rs 5 lakh?
Retirement Planning: A person’s sources of income may diminish or cease to exist as they approach retirement. However, their costs will be there. They may rise, fall, or stay the same, but retirees require a certain amount to meet their everyday necessities. A sizable retirement corpus is required in such a scenario. However, whence might it originate? It can result from the investments you make while you’re employed.
One might continue investing to build a sizable retirement corpus, brick by brick. However, why is a retirement corpus required?
How to develop a retirement corpus, what investments to make, and how to convert a Rs 5 lakh one-time investment into a Rs 1.5 crore retirement corpus.
See details-
What is retirement corpus?
A retirement corpus is a sum of money that gives you financial independence when you retire. A corpus should be sufficiently large to allow you to live independently.
How large retirement corpus should be?
Depending on when you wish to retire and how long you intend to live in retirement, you must determine the retirement corpus amount.
You have 25 years to invest and require corpus for as many years as you desire if you are 35, wish to retire at 60, and need corpus until you are 85.
Knowing your monthly or annual expenses at retirement age is necessary to determine your retirement amount; you can do this by using inflation.
The rate of inflation will cause the expenditure to increase.
How can you create retirement corpus?
To build a retirement corpus, one might choose between market-linked and fixed interest investment options. Market-linked options will yield growth over time, while fixed income options can stabilize your corpus.
Post-tax investment returns
Tax laws are always evolving.
Therefore, it is crucial to keep abreast of the most recent regulations and to continuously adjust your approach.
Reaching the retirement corpus within the allotted time should be the ultimate objective.
Benefits of starting to invest early
The early starter gets more years for compounding of their investment.
So, the one who starts early can achieve the retirement corpus target with a smaller amount compared to a late starter. It is because an early starter gets more years for compounding.
Example of early investment
Let’s say that A and B exist.
B begins investing for retirement at age 35, while A begins at age 25.
By the time they are 60, both wish to have accumulated a retirement fund of Rs 5 crore.
Both choose monthly SIP investing as the mode and anticipate an annualized return on investment of 12%.
With an expected monthly SIP amount of Rs 7,700 and an estimated total amount of Rs 32,34,000, A invests for 35 years and achieves the Rs 5 crore retirement corpus aim.
With an estimated monthly SIP amount of Rs 26,350 and an estimated total amount of Rs 79,05,000. B invests for 25 years and achieves the Rs 5 crore retirement corpus aim.
How to create Rs 1.5 crore corpus with Rs 5 lakh one-time investment
One can reach the goal in about 30 years if they deposit Rs 5 lakh in one go and receive a 12% annualized return on their investment. Let’s examine this investment’s breakdown over the next ten, twenty, and thirty years.
Corpus from Rs 5 lakh one-time investment in 10 years
In 10 years, estimated capital gains will be Rs 10,52,924, and the estimated retirement corpus will be Rs 15,52,924.
Corpus from Rs 5 lakh one-time investment in 20 years
In 20 years, estimated capital gains will be Rs 43,23,147 and the estimated corpus will be Rs 48,23,147.
Corpus from Rs 5 lakh one-time investment in 30 years
In 30 years, estimated capital gains will be Rs 1,44,79,961, and the estimated corpus will be Rs 1,49,79,961.
As you can see that the corpus is growing faster in every 10 years. It is because of the compound growth of SIP investment.
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
FAQ ‘s
? What is the 7% rule for retirement?
What is the 7 Percent Rule? In contrast to the more conservative 4% rule, the 7 percent rule suggests retirees can withdraw 7% of their total retirement corpus in the first year of retirement, with subsequent annual adjustments for inflation.
How to get RS 50,000 pension per month?
Investment Options to Get Rs. 50,000 Pension Per Month
- Unit-Linked Insurance Plans. Combines benefits of insurance and investment. …
- Pension Plans. …
- Annuity Plans. …
- Capital Guarantee Plans. …
- Systematic Investment Plans (SIPs) …
- Fixed Deposits (FDs) …
- Senior Citizen Saving Scheme (SCSS) …
- Employee Provident Fund
? What is 45% retirement rule?
The 45% retirement rule typically refers to a guideline used by some retirement planning schemes or financial advisors. It suggests that you should aim to save 45% of your pre-retirement income or current income for your retirement corpus.
? What is the golden rule for retirement?
The general rule of thumb is to save at least 15% of your pre-tax income for retirement. However, it’s essential to consider individual factors such as your age, income and desired retirement lifestyle.
The nominal minimum pension age is currently 55 (set to rise to 57 in 2028). This means most people can’t access money in a pension – without risking penalties – before this age. Early retirement refers to any retirement before the state pension age of 66 (if retiring in 2024) or 67 (if retiring in or after 2027).
Also Read :