How 15-year delay can shrink your retirement corpus by Rs 4.59 crore; know maths
Retirement Planning: Early investors get an edge over late starters when it comes to building retirement corpus. If you start investing at 25 or 30 years of age, your retirement corpus is likely to be much larger if you start investing at 35 or 40.
Retirement Calculator: Why should one start investing early? To get a large corpus! But what if instead of starting investing early, you enjoy life at a young age and start investing late with a much higher amount? Won't it help build a higher corpus compared to low-amount investment at a young age? It may, but in that case, your investment amount should be much higher compared to the same at an early age. E.g., if you start investing Rs 5,000 monthly at 25 years, invest it for the next 30 years, or till 55 years of age, your investment will be Rs 18 lakh. If you get 12 per cent annualised returns on it, the estimated corpus at 55 will be Rs 1.54 core. But if you delay your investment by 15 years and start it at 40, to get the same corpus in the next 15 years, your estimated monthly investment should be Rs 32,500. It means your total investment will be Rs 58.30 lakh compared to Rs 18 lakh in the first case. In nutshell, you will invest estimated Rs 50.30 lakh more to get the same corpus. In this write-up, know how delaying investment by a few years can reduce your retirement corpus by a significant margin.
Photos: Unsplash/Pixabay
(Disclaimer: Calculations in this story are projections. They are not investment advice. Do your due diligence or consult an expert for retirement planning).
Investment conditions
We will take the example of a Rs 10,000 monthly investment, and we will expect a 12 per cent annualised return on this investment.
Investment conditions
The investment horizon will be till the retirement age of 60 years. We will calculate the retirement corpus starting at ages 25, 30, 35, and 40.
Retirement corpus on Rs 10,000/m investment if you start investing at 25
If you invest Rs 10,000 a month starting at 25, your investment in the 35-year span will be Rs 42,00,000
Retirement corpus on Rs 10,000/m investment if you start investing at 25
Estimated long term capital gains will be Rs 5,09,08,311, and the estimated corpus will be Rs 5,51,08,311.
Retirement corpus on Rs 10,000/m investment if you start investing at 30
On a Rs 10,000 monthly investment starting age 30, your investment in 30 years will be Rs 36,00,000
Retirement corpus on Rs 10,000/m investment if you start investing at 30
Estimated long term capital gains will be Rs 2,72,09,732, and the estimated corpus will be Rs 3,08,09,732, a Rs 2,42,98,579 less than that of 35 years of investment.
Retirement corpus on Rs 10,000/m investment if you start investing at 35
On a Rs 10,000 monthly investment starting age 35, your investment in 25 years will be Rs 30,00,000, estimated long term capital gains will be 1,40,22,066.
Retirement corpus on Rs 10,000/m investment if you start investing at 35
Estimated long term capital gains will be 1,40,22,066, and the estimated corpus will be Rs 1,70,22,066, a Rs 3,80,86,245 less than that of 35 years of investment.
Retirement corpus on Rs 10,000/m investment if you start investing at 40
On a Rs 10,000 monthly investment starting age 40, your investment in 20 years will be Rs 24,00,000, estimated long term capital gains will be Rs 67,98,574.
Retirement corpus on Rs 10,000/m investment if you start investing at 40
The estimated corpus will be Rs 91,98,574, a Rs 4,59,09,737 less than that of 35 years of investment.
What makes a difference?
In an investment, duration matters. Compare two scenarios when you start investing at 25 and at 40, the difference in invested money is just Rs 18 lakh, but the estimated corpus is shorter by Rs 4,59,09,737 for the late starter.