Power of Compounding | Starting at ages 25, 30 & 35, how to aim for Rs 2.5 crore early retirement corpus?
Let’s understand how an individual can aim to build a retirement corpus of Rs 2.5 crore upon reaching the age of 55 years by starting to invest at the ages of 25, 30 and 35. Here, we will explore investment amounts with examples, aiming for retirement at age 55.
Planning for early retirement requires smart financial strategies, especially when an individual is targeting a large corpus like Rs 2.5 crore by the age of 55. The earlier you start, the easier it becomes to reach your goal. Whether you are 25, 30, or 35, each age offers different advantages and challenges when it comes to saving and investing. In this article, let's explore how much money to invest each month to aim to build a corpus of Rs 2.5 crore in 20, 25 and 30 years.
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(Disclaimer: The calculations mentioned in this article are projections and not investment advice. Do your due diligence or consult an expert for financial planning.)
Understanding retirement planning
Retirement planning is one’s preparation for a good life after they are done working for a full-time job. To create a retirement plan, one should begin by determining their long-term financial goals and risk appetite.
Simply put, starting to invest earlier is always better than starting late.
Introduction to SIP
If you are planning a retirement corpus or other financial goal, a systematic investment plan (SIP) is suitable for all your financial needs.
It is a process of investing in a mutual fund with a fixed amount, either daily, weekly, monthly, or yearly.
Start early
The smallest investments can also grow to huge amounts over long period of time, helping you meet your financial goals. Therefore, one must start investing early in their life.
To support your investment purpose, the SIP route allows a minimum monthly investment starting with Rs 100, but it can vary depending on the mutual fund scheme.
Retirement planning through monthly SIP
A systematic investment plan (SIP) enables investors to build wealth over time by investing a fixed amount at regular intervals such as daily, weekly, monthly, half-yearly, or yearly.
Investors can adjust their investment amounts based on their finances.
They can also stop or restart their SIP if they so choose.
Starting monthly SIP at age 25
Starting at 25 gives you 30 years to accumulate Rs 2.5 crore corpus by age 55.
The power of compounding is at its peak when you start early, say financial planners.
Starting monthly SIP at age 30
Starting at 30 means you have 25 years to build the corpus. While you have lost five years compared to starting at 25, you still have enough time to reach your target with the right investment choices.
Starting monthly SIP at age 35
Starting at 35 gives you 20 years to achieve your retirement goal, making it more challenging, but not impossible.
To reach Rs 2.5 crore, you will need to invest more consistently.
SIP monthly investment amount at the age of 25
One has to invest Rs 7,300 in monthly SIP to reach a retirement corpus of Rs 2.5 crore by the age of 55, assuming an annualised return of 12 per cent, calculations show.
From Rs 7,300 monthly SIP to Rs 2.5 crore corpus at 12 per cent annualised return
It will take approximately 30 years to achieve the target of Rs 2.5 crore retirement corpus. During this time, the investment will be Rs 26,28,000, the estimated capital gains will be Rs 2,31,40,371 and the estimated retirement corpus will be Rs 2,57,68,371.
SIP monthly investment amount at the age of 30
One has to invest Rs 13,500 in monthly SIP to reach the retirement corpus of Rs 2.5 crore by the age of 55, calculations show.
From Rs 13,500 monthly SIP to Rs 2.5 crore corpus at 12 per cent annualised return
It will take approximately 25 years to achieve the target of Rs 2.5 crore retirement corpus. During this time, the investment will be Rs 40,50,000, the estimated capital gains will be Rs 2,15,68,074 and the estimated retirement corpus will be Rs 2,56,18,074.
SIP monthly investment amount at the age of 35
One has to invest Rs 25,500 in monthly SIP to reach the retirement corpus of Rs 2.5 crore by the age of 55, calculations show.
From Rs 25,500 monthly SIP to Rs 2.5 crore corpus at 12 per cent annualised return
It will take approximately 20 years to achieve the target of Rs 2.5 crore retirement corpus. During this period, the investment will be Rs 61,20,000, the estimated capital gains will be Rs 1,93,58,272 and the estimated retirement corpus will be Rs 2,54,78,272.