Kolkata: Financial uncertainty is constantly rising in the modern world. And with the rise of financial insecurity, the importance of retirement planning is increasing. Retirement planning is important because of a tragic truth in life — income stops with retirement but expenditure doesn’t. In fact, in many situations expenditure can rise since healthcare and medical expenses can expand considerably if a senior citizen is not of particularly sound health. Please remember, medical inflation is far higher than retail inflation rate in the country.
One of the most preferred routes of long term investment, which lends itself to retirement planning, is the systematic investment plan (SIP) in mutual funds. Investment in mutual funds only through the SIP route averages more than Rs 1,000 crore each trading day in a month. The reasons are not far to seek. SIPs allow investors to generate appreciation of capital by benefiting from the stock market boom through small regular investments according to the depth of one’s pocket. Moreover, since the money is managed by qualified professionals, investors are not exposed to the headache and constant monitoring that even a very season investor directly putting his/her money in equities has to bear. Using an online free calculator let’s see how one can pull off retirement planning quite effectively if one begins from a young age.
How much SIP per month for Rs 5 crore at 60
There is no unique answer to this question. The amount of monthly SIP one has to do depends on the age at which one begins the journey as well as on the average rate of return that the mutual fund schemes generate for the investor. For our calculation, let’s assume two things: One, a goal to generate Rs 5 crore at the age of 60 years and two, the average rate of return is 12%, which is a template return in these calculators and considered quite achievable.
The goal-based SIP calculator tells us that if an investor starts SIP at the age of 35, he/she will need to invest Rs 26,612 every month to accumulate Rs 5 crore by the age he/she turns 60. The calculator will also tell you that during the 25 years, you would invest Rs 79.84 lakh from your pocket (nominal value). If you think that is quite within your reach, the SIP arithmetic has more surprise in store you.
If you start the SIP at the age of 30, the SIP reduces sharply. You will need to invest Rs 14,306 a month whereas you had to invest Rs 26,612 if you began investing at the age of 35. This way you will be investing Rs 51.50 lakh in total. If you began at 35, you will need to invest a hell of a lot more.
Start at 25 for this bonanza
But the real bonanza will wait for you if you can flag off your SIP journey at the age of 25. In that case, you will get a good 35 years to build your corpus of Rs 5 crore and the monthly SIP wi1ll dip to an incredibly low Rs 7,775. If you can really begin at 25 years, you will also be putting in only Rs 32.65 lakh over 35 years ie, till you turn 60. It is not surprising that investment experts constantly harp on the need to start investment early since the force of compounding plays out brilliantly in the long term.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, any form of alternative investment instruments and crypto assets.)
The immense power of compounding in best experienced over the long term, and therefore, one can easily generate a corpus of Rs 5 crore by investing a small amount of money if one starts investing early in life. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
